Operating Cash Flow The financial staff of Cairn Communications has identified t
ID: 2472539 • Letter: O
Question
Operating Cash Flow
The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service:
The company faces a 30% tax rate. What is the project's operating cash flow for the first year (t = 1)? Write out your answer completely. For example, 2 million should be entered as 2,000,000.
THE ANSWER IS NOT 10,200,000. I HAVE SEEN VERY FEW CORRECT ANSWERS FOR THIS TYPE OF QUESTION. IF YOU COME UP WITH 10,200,000 IT IS WRONG.
Projected sales $25 million Operating costs (not including depreciation) 8 million Depreciation 6 million Interest expense 5 millionExplanation / Answer
Particulars Amount $ Cash Flow from Operating Activities Net Income 42,00,000 Adjustments Add: Depreciation & Amortisation 60,00,000 Add: Interest expenses 50,00,000 Total Cash Flow from Operating Activities 1,52,00,000 WN 1 - Net income $ Sales 2,50,00,000 Less Operating costs 80,00,000 Depreciation 60,00,000 Interest expenses 50,00,000 Profit before tax 60,00,000 Less Tax @ 30% 18,00,000 Profit After Tax 42,00,000
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