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:

Projected sales -- $25million

Operating costs (not including depreciation) -- $12 milion

Depreciation -- $5 million

Interest Expense -- 4 million

The company faces a 40% 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.

$__________

Explanation / Answer

OCF=(sales-costs)*(1-t)+depreciation*t

(25-12)*(1-0.4)+5*0.4=7.8+2=9.8

Answer $9800000

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