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A firm evaluates a future project by undertaking a feasibility study. If the project is accepted it will reduce demand for existing products it sells. The firm will have to borrow money to fund the project. Which of the following cash flows is relevant to evaluating the NPV of this project?
The amount of revenue lost as a result of cannibilised sales from reduced demand.
None of the above are relevant to calculating the NPV.
Financing costs associated with the firm borrowing money.
The cost of the feasibility study.
Calculating OCF. Hammett, Inc., has sales of $34,630, costs of $10,340, depreciation expense of $2,520, and interest expense of $1,750. If the tax rate is 35 percent, what is the operating cash flow, or OCF?
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