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PROJECT CASH FLOW Eisenhower Communications is trying to estimate the first- year net cash flow ( at Year 1) for a proposed project. The financial staff has collected the following information on the project: Sales revenues $ 10 million Operating costs ( excluding depreciation) 7 million Depreciation 2 million Interest expense 2 million The company has a 40% tax rate, and its WACC is 10%. a. What is the project’s net cash flow for the first year (t=1)? b. If this project would cannibalize other projects by $ 1 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?
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