The project’s cash flow for the first year. Introduction: Project Cash Flows: Cash flow statement is prepared to see that the position of cash. The cash flow for the specific project is known as the project cash flow.

Question

Colsen Communications is trying to estimate the first-year cashflow (at Year 1) for a proposed project. The financial staff has collected the following informationon the project:Sales revenues $15 millionOperating costs (excluding depreciation) 10.5 millionDepreciation 3 millionInterest expense 3 millionThe company has a 40% tax rate, and its WACC is 11%.a. What is the project’s cash flow for the first year (t = 1)?b. If this project would cannibalize other projects by $1.5 million of cash flow before taxesper year, how would this change your answer to part a?c. Ignore part b. If the tax rate dropped to 30%, how would that change your answer topart a?

Answer 1

Question

Chapter 12, Problem 2P

a.

Summary Introduction

To compute: The project’s cash flow for the first year.

Introduction:

Project Cash Flows:

Cash flow statement is prepared to see that the position of cash. The cash flow for the specific project is known as the project cash flow.

b.

Summary Introduction

To compute: The cash flow of project when the cash flow before tax is $1.5 million.

c.

Summary Introduction

To compute: The project’s cash flow for the first year if the tax rate is 30%.

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Colsen Communications is trying to estimate the first-year cashflow (at Year 1) for a proposed project. The financial staff has collected the following informationon the project:Sales revenues $15 millionOperating costs (excluding depreciation) 10.5 millionDepreciation 3 millionInterest expense 3 millionThe company has a 40% tax rate, and its WACC is 11%.a. What is the project’s cash flow for the first year (t = 1)?b. If this project would cannibalize other projects by $1.5 million of cash flow before taxesper year, how would this change your answer to part a?c. Ignore part b. If the tax rate dropped to 30%, how would that change your answer topart a?

PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following infor- mation on the project: 12-2 Sales revenues $15 million Operating costs (excluding depreciation) 10.5 million Depreciation 3 million Interest expense 3 million The company has a 40% tax rate, and its WACC is 11%. a. What is the project's cash flow for the first year (t = 1)? b. If this project would cannibalize other projects by $1.5 million of cash flow before taxes per year, how would this change your answer to part a? c. Ignore part b. If the tax rate dropped to 30%, how would that change your answer to part a?

Answer 2

Question

Chapter 12, Problem 2P

a.

Summary Introduction

To compute: The project’s cash flow for the first year.

Introduction:

Project Cash Flows:

Cash flow statement is prepared to see that the position of cash. The cash flow for the specific project is known as the project cash flow.

b.

Summary Introduction

To compute: The cash flow of project when the cash flow before tax is $1.5 million.

c.

Summary Introduction

To compute: The project’s cash flow for the first year if the tax rate is 30%.

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Answer 3

Question

Chapter 12, Problem 2P

a.

Summary Introduction

To compute: The project’s cash flow for the first year.

Introduction:

Project Cash Flows:

Cash flow statement is prepared to see that the position of cash. The cash flow for the specific project is known as the project cash flow.

b.

Summary Introduction

To compute: The cash flow of project when the cash flow before tax is $1.5 million.

c.

Summary Introduction

To compute: The project’s cash flow for the first year if the tax rate is 30%.

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Answer 4

Question

Chapter 12, Problem 2P

a.

Summary Introduction

To compute: The project’s cash flow for the first year.

Introduction:

Project Cash Flows:

Cash flow statement is prepared to see that the position of cash. The cash flow for the specific project is known as the project cash flow.

b.

Summary Introduction

To compute: The cash flow of project when the cash flow before tax is $1.5 million.

c.

Summary Introduction

To compute: The project’s cash flow for the first year if the tax rate is 30%.

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Answer 5

Chapter 12, Problem 2P

a.

Summary Introduction

To compute: The project’s cash flow for the first year.

Introduction:

Project Cash Flows:

Cash flow statement is prepared to see that the position of cash. The cash flow for the specific project is known as the project cash flow.

b.

Summary Introduction

To compute: The cash flow of project when the cash flow before tax is $1.5 million.

c.

Summary Introduction

To compute: The project’s cash flow for the first year if the tax rate is 30%.

Answer 6

Chapter 12, Problem 2P

a.

Summary Introduction

To compute: The project’s cash flow for the first year.

Introduction:

Project Cash Flows:

Cash flow statement is prepared to see that the position of cash. The cash flow for the specific project is known as the project cash flow.

Answer 7

Chapter 12, Problem 2P

a.

Summary Introduction

To compute: The project’s cash flow for the first year.

Introduction:

Project Cash Flows:

Cash flow statement is prepared to see that the position of cash. The cash flow for the specific project is known as the project cash flow.

Answer 8

b.

Summary Introduction

To compute: The cash flow of project when the cash flow before tax is $1.5 million.

Answer 9

b.

Summary Introduction

To compute: The cash flow of project when the cash flow before tax is $1.5 million.

Answer 10

c.

Summary Introduction

To compute: The project’s cash flow for the first year if the tax rate is 30%.

Answer 11

c.

Summary Introduction

To compute: The project’s cash flow for the first year if the tax rate is 30%.

Answer 12

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The project’s cash flow for the first year. Introduction: Project Cash Flows: Cash flow statement is prepared to see that the position of cash. The cash flow for the specific project is known as the project cash flow.

Solution Summary: The author explains how to calculate the project's cash flow for the first year.

To compute: The project’s cash flow for the first year.

Introduction:

Project Cash Flows:

Cash flow statement is prepared to see that the position of cash. The cash flow for the specific project is known as the project cash flow.

To compute: The cash flow of project when the cash flow before tax is $1.5 million.

To compute: The project’s cash flow for the first year if the tax rate is 30%.

Chapter 12 Solutions

The project’s cash flow for the first year. Introduction: Project Cash Flows: Cash flow statement is prepared to see that the position of cash. The cash flow for the specific project is known as the project cash flow.

Solution Summary: The author explains how to calculate the project's cash flow for the first year.

To compute: The project’s cash flow for the first year. Introduction: Project Cash Flows: Cash flow statement is prepared to see that the position of cash. The cash flow for the specific project is known as the project cash flow.

To compute: The cash flow of project when the cash flow before tax is $1.5 million.

To compute: The project’s cash flow for the first year if the tax rate is 30%.

Chapter 12 Solutions

To compute: The project’s cash flow for the first year.

Introduction:

Project Cash Flows:

Cash flow statement is prepared to see that the position of cash. The cash flow for the specific project is known as the project cash flow.