Bundle: Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition 6-Month Printed Access Card), 8th + Aplia Printed Access Card
8th Edition
ISBN: 9781305132559
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Question
Chapter 12, Problem 2P
a.
Summary Introduction
To compute: The project’s cash flow for the first year.
Project’s Cash Flows:
Cash flow statement is prepared to see 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 $1million.
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?
. Cols Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project:
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%.
What is the project’s cash flow for the first year (t = 1)?
If the tax rate dropped to 30%, what is the project’s cash flow for the first year (t = 1)?
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?
Chapter 12 Solutions
Bundle: Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition 6-Month Printed Access Card), 8th + Aplia Printed Access Card
Ch. 12 - Prob. 1QCh. 12 - Prob. 2QCh. 12 - Explain why net operating working capital is...Ch. 12 - Why are interest charges not deducted when a...Ch. 12 - Prob. 5QCh. 12 - What are some differences in the analysis for a...Ch. 12 - Distinguish among beta (or market) risk,...Ch. 12 - Prob. 8QCh. 12 - Prob. 9QCh. 12 - If you were the CFO of a company that had to...
Ch. 12 - REQUIRED INVESTMENT Truman Industries is...Ch. 12 - Prob. 2PCh. 12 - AFTER-TAX SALVAGE VALUE Kennedy Air Services is...Ch. 12 - REPLACEMENT ANALYSIS The Chang Company is...Ch. 12 - OPTIMAL CAPTTAL BUDGET Marble Construction...Ch. 12 - DEPRECIATION METHODS Kristin is evaluating a...Ch. 12 - SCENARIO ANALYSIS Huang Industries is considering...Ch. 12 - NEW PROJECT ANALYSIS You must evaluate the...Ch. 12 - NEW PROJECT ANALYSIS You must evaluate a proposal...Ch. 12 - Prob. 10PCh. 12 - REPLACEMENT ANALYSIS Mississippi River Shipyards...Ch. 12 - PROJECT RISK ANALYSIS The Butler-Perkins Company...Ch. 12 - SCENARIO ANALYSIS Your firm, Agrico Products, is...Ch. 12 - NEW PROJECT ANALYSIS Holmes Manufacturing is...Ch. 12 - REPLACEMENT ANALYSIS The Erley Equipment Company...Ch. 12 - REPLACEMENT ANALYSIS The Bigbee Bottling Company...Ch. 12 - ABANDONMENT OPTION The Scampini Supplies Company...Ch. 12 - OPTIMAL CAPITAL BUDGET Hampton Manufacturing...Ch. 12 - NEW PROJECT ANALYSIS You must analyze a potential...Ch. 12 - INTEGRATED CASE ALLIED FOOD PRODUCTS CAPITAL...
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