What is the project's operating cash flow for the first year(t=1)?

Question

Eisenhower Communications is trying to estimate the first-year operating cash flow (at t = I) for a proposed project. The financial staff has collected me following information:

Projected sales $10 million

Operating costs (excluding depreciation) 7 million

Depreciation 2 million

Interest expense 2 million

The company faces a 40 percent tax rate. What is the project's operating cash flow for the first year

(t = 1)?

Answer 1

 Operating CAsh flows at t=1,

 

Sales -operating cost- deprictions = 10-7-2 = 1 million - taxes = 600,000$ is operating CF

tax = 40% = 400,000

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