Computing Operating Cash Flows
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Cairn Communications is trying to estimate the first-year operating cash flow (at t=1) for a proposal project. The financial staff has collected the following information:
Projected Sales - $10m, Operating Costs (not including depreciation) - $7m, Depreciation - $2m, Interest Expense - $2m
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
This solution illustrates how to compute operating cash flows.
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The free cash flow will be the net income after the tax shield for the depreciation. (Depreciation is a non-cash expense, so it decreases taxable income, but does not result in a cash ...
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