Operating cash flow computation
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"The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed services:
Project Sales $18 million
Operating Costs (not including deprecation) $ 9 million
Depreciation $ 4 million
Interest expense $ 3 million
The company faces a 40% tax rate. What is the project's operating cash flow for the first year (t = 1)?"
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Solution Summary
"The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed services:
Project Sales $18 million
Operating Costs (not including deprecation) $ 9 million
Depreciation $ 4 million
Interest expense $ 3 million
The company faces a 40% tax rate. What is the project's operating cash flow for the first year (t = 1)?"
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Solution:
Step 1: Operating income = Sales - Operating costs - Depreciation = $18 million - $9 million - $4 million = $5 ...
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