Calculate the operating cash flows for first year of project


Problem

The Rare Find Co. has the following information:

Debt outstanding: $350 million
The before-tax cost of debt: 6%
Market cap: $1,250 million
Cost of common stock: 12%
Tax rate: 21%

Rare Find is evaluating a project with the following information:

Over the next seven years, EBIT will equal 41 million each year

An investment of $25 million is required in net working capital at the beginning of the project, which will be recovered at the end.

The equipment cost will be $70 million depreciated using straight-line to zero over the project's life, with no salvage value.

The project requires an additional 2% risk premium above the firm's WACC.

Task

1. Calculate the operating cash flows for the first year of the project. (Enter the full value, e.g. 5 million as 5,000,000)
2. Calculate the net present value for the project. (Enter the full value, e.g. 5 million as 5,000,000 and round to 2 decimals)

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Business Management: Calculate the operating cash flows for first year of project
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