The financial staff of Carrier Communications has identified the following infor

Question

The financial staff of Carrier Communications has identified the following information for the first year of the roll-out of its new proposed service: The company faces 40% tax rate. What is the project's operating cash flow for the first year (t=l)? Swift Airlines must liquidate some equipment that is being replaced. The equipment originally cost $12 million, of which 75% has been depreciated. The equipment can be sold today for $4 million, and its tax rate is 40%. What is the equipment's after-tax salvage value?

Explanation / Answer

Ans 2)

Project's operating cash flow for first year = (18-9-4-3)*(1-0.4)+4

= $5.2 million

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