Roosevelt Publishing is trying to estimate the first-year operating cash flow for a proposed project on which it has collected the following information:

Sales revenues                                        $11.5 million

Operating costs (excluding depreciation)   5.5 million

Depreciation                                           2.3 million

Interest expense                                     1.6 million

Roosevelt’s financial staff has also determined that this project would cannibalize one of the firm’s other projects by $1.3 million of cash flow (before taxes) per year. Roosevelt has a 35 percent tax rate, and its WACC is 10 percent. Calculate the project’s operating cash flow for Year 1.

a. $1,560,000

b. $3,860,000

c. $4,705,000

d. $2,405,000

e. $2,820,000