1. A company is considering a capital project that will increase Sales Revenue by $2,000,000 per year. The project will also cause COGS Expense to rise by $400,000 each year. In addition, Depreciation Expense will go up by $150,000 per year, and Selling, General & Administrative Expenses will increase $550,000 per year. The company’s marginal tax rate is 35%. What is the annual after-tax operating cash flow to be generated by the project?
2. Carbunkle Corp. is evaluating a project that will require the firm to spend $4,000,000 to purchase and install new equipment, which will be depreciated on a straight-line basis over 5 years to a value of $0. The project will reduce Selling, General & Administrative expenses by $500,000 each year for 5 years. The company’s marginal tax rate is 35%. What is the project’s annual after-tax operating cash flow?