1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
bulgar [2K]
3 years ago
5

Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has

collected the following information on the project: Sales revenues $20 million Operating costs (excluding depreciation) 14 million Depreciation 4 million Interest expense 4 million The company has a 40% tax rate, and its WACC is 13%. Write out your answers completely. For example, 13 million should be entered as 13,000,000. What is the project's cash flow for the first year (t = 1)? Round your answer to the nearest dollar. $ If this project would cannibalize other projects by $2 million of cash flow before taxes per year, how would this change your answer to part a? Round your answer to the nearest dollar. The firm's project's cash flow would now be $ . Ignore part b. If the tax rate dropped to 35%, how would that change your answer to part a? Round your answer to the nearest dollar. The firm's project's cash flow would by $
Business
1 answer:
Andrew [12]3 years ago
5 0

Answer:

(i) $5,200,000

(ii) $4,000,000

(iii) $5,300,000

Explanation:

(a) Profits before tax:

= Sales - costs - Depreciation

= $20 - $14 - $4

= $2 million

Net operating income = Profits before tax - Tax @40%

                                     = $2,000,000 - $800,000

                                     = $1,200,000

Project's cash flow for the first year:

= Net operating income + Depreciation

= $1,200,000 + $4,000,000

= $5,200,000

(b) Profits before tax:

= Sales - costs - Depreciation

= $20 - $14 - $4

= $2 million

Operating cash flows year:

= Profits before tax - Cannibalize effect + Depreciation

= $2,000,000 - $2,000,000 + $4,000,000

= $4,000,000

(c) Profits before tax:

= Sales - costs - Depreciation

= $20 - $14 - $4

= $2 million

Net operating income = Profits before tax - Tax @35%

                                     = $2,000,000 - $700,000

                                     = $1,300,000

Operating cash flows year:

= Net operating income + Depreciation

= $1,300,000 + $4,000,000

= $5,300,000

Operating cash flows will increase by $100,000.

You might be interested in
Which result is a positive aspect of globalization
xxTIMURxx [149]
More efficent markets
8 0
3 years ago
Read 2 more answers
PLEASE HELP!!!
Marta_Voda [28]

Answer:

Expenses

Explanation:

4 0
2 years ago
The step in the formal planning process known as __________ involves studying past events, examining current conditions, and for
grigory [225]
Situation analysis

I hope this helps (:
6 0
2 years ago
The last dividend paid by Wilden Corporation was $1.55. The dividend growth rate is expected to be constant at 1.5% for 2 years,
shtirl [24]

Answer:

e)  $37.05

Explanation:

Using the dividend growth model, the value of a stock is the present value of the future dividends receivable discounted at the required rate of return . The required rate of return is given as 12%.

So we discount the year 3 dividend using the dividend growth model formula

P = D (1+g)/r-g

r- rate of return, g = growth rate

Present value of the future dividends:

PV of Year 1 = 1.55(1.015)m × 1.12^(-1)

                     = 1.4047

PV of Year 2 = 1.55 (1.015)(1.015) × 1.12^(-2)

                     =  1.27

PV of Year 3 (this will be done in two steps)

Step 1; PV (in yr 2) of year 3 dividend

= (1.55)(1.015)^2×(1.08)/(0.12-0.08)

=43.114

Step 2 : PV (in yr 2) of year 3 dividend

  =43.114 × (1.12^(-2))

   = 34.37

Best estimate of stock = 1.40 + 1.27 +34.37

                                       = $37.05

Note

To discount the year 3 dividend, we use two steps. The first stp helps get the PV in year 2, and step 3 helps to take it further to the PV in year 0

         

8 0
2 years ago
What is a retail Growth potential?
mr Goodwill [35]

Answer:

decisions related to allocating available resources among different target markets and retail formats

Explanation:

7 0
1 year ago
Other questions:
  • A financially-responsible person reacts quickly to problems. True or False
    6·2 answers
  • What future IT capability needs (both physical and human) could the organisation have with respect to document design and produc
    11·1 answer
  • Which of the following is an example of how the Principle of Beneficence can be applied to a study employing human subjects?
    13·1 answer
  • A(n) ___________________ is a state-chartered legal entity with authority to act and to have liability separate from its owners.
    11·1 answer
  • Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when _
    12·1 answer
  • A company rents a building with a total of 100,000 square feet, which are evenly divided between two floors. The space on the fi
    13·1 answer
  • At the end of May, the following adjustment data were assembled.
    13·1 answer
  • WeeBee Company has three assembly labor dassifications: 5-1, S-2, and S-3. The three dassifications are paid $16, $19, and $22 p
    12·1 answer
  • The purchase of merchandise, the sale of goods and services to customers, and expenditures to operate the business are all repor
    12·1 answer
  • As a group, oligopolists would always be better off if they would act collectively
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!