Explore BrainMass

Explore BrainMass

    Operating Cash Flow (OCF) for Company XYZ

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    OCF at year 1 (t=1) for a proposed project for company XYZ has the following information:

    Sales = $10,000,000
    Operating Costs (excludes depreciation) = $7,000,000
    Depreciation = $2,000,000
    Interest Expense = $2,000,000
    XYZ tax rate = 40%
    XYZ WACC (Weighted Avg. Cost Capital) = 10%

    1) What is the project's operating cash flow for the first year (t=1)?
    2) If this project would cannibalize other projects by $1,000,000 of cash low before taxes per year, how would this change the answer to part 1?
    3) Ignore part 2. If the tax rate dropped to 30%, how would that change the answer to part 1?

    © BrainMass Inc. brainmass.com June 3, 2020, 7:55 pm ad1c9bdddf
    https://brainmass.com/business/cash/operating-cash-flow-ocf-company-xyz-117027

    Solution Summary

    The solution calculates the project's operating cash flow.

    $2.19

    ADVERTISEMENT