Operating Cash Flow The financial staff of Cairn Communications has identified t

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.

$  

Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $23 million, of which 85% has been depreciated. The used equipment can be sold today for $5.75 million, and its tax rate is 35%. What is the equipment's after-tax net salvage value? Write out your answer completely. For example, 2 million should be entered as 2,000,000.

$  

Projected sales $25 million Operating costs (not including depreciation) 13 million Depreciation 4 million Interest expense 4 million

Explanation / Answer

Answer:

1)

2)

(end)

in $ Projected sales 250,00,000 Operating costs (not including depreciation)              130,00,000 Operating income              120,00,000 Depreciation 4000000 PBIT                80,00,000 Interest expense 4000000 PBT                     40,00,000 Tax rate @ 30%                  12,00,000.0 Net income                  28,00,000.0 Operating cash flows                  68,00,000.0

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