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(answered) – 1. The financial staff of Cairn Communications has identified theDescriptionSolution downloadThe Question1. 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 $25 millionOperating costs (not including depreciation) 7 millionDepreciation 6 millionInterest expense 5 millionThe company faces a 35% 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 2,000,000.2.?Wendy’s boss wants to use straight-line depreciation for the new expansion project because he said it will give higher net income in earlier years and give him a larger bonus. The project will last 4 years and requires $800,000 of equipment. The company could use either straight-line or the 3-year MACRS accelerated method. Under straight-line depreciation, the cost of the equipment would be depreciated evenly over its 4-year life (ignore the half-year convention for the straight-line method). The applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. The company’s WACC is 10%, and its tax rate is 45%. MACRS depreciation produces a higher NPV than straightline depreciation. How much higher would the NPV be through MACRS than straightline?QUESTION 1Cairn CommunicationsDtermination of Annual Cash flowsfor the first year.Projected sales$Less:Operating costs (excluding depreci $Income before depreciation$less: depreciation…

(answered) – 1. The financial staff of Cairn Communications has identified the

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