I know this is a lot of information but this is what I would need to solve the problem.  Any help would be appreciated!Your company, VR Co., has been approached to bid on a contract to sell 20,000 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $4 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $80,000 initially and to be returned at the end of the project, and the equipment can be sold for $200,000 at the end of production. Fixed costs are $700,000 per year, and variable costs are $48 per unit. In addition to the contract, you feel your company can sell 4,000, 12,000, 14,000, and 7,000 additional units to companies in other countries over the next four years, respectively, at a price of $145. This price is fixed. The tax rate is 40% and the required return is 13%. Additionally, the president of the company will undertake the project only if it has an NPV of $300,000. I need to figure out the Operating Cash Flow for year 1 and the Total Cash Flow for year 4.

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Asked Jan 24, 2020
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I know this is a lot of information but this is what I would need to solve the problem.  Any help would be appreciated!

Your company, VR Co., has been approached to bid on a contract to sell 20,000 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $4 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $80,000 initially and to be returned at the end of the project, and the equipment can be sold for $200,000 at the end of production. Fixed costs are $700,000 per year, and variable costs are $48 per unit. In addition to the contract, you feel your company can sell 4,000, 12,000, 14,000, and 7,000 additional units to companies in other countries over the next four years, respectively, at a price of $145. This price is fixed. The tax rate is 40% and the required return is 13%. Additionally, the president of the company will undertake the project only if it has an NPV of $300,000. 

I need to figure out the Operating Cash Flow for year 1 and the Total Cash Flow for year 4.

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Expert Answer

Step 1

Calculation of Operating Cash Flow for year 1 and the Total Cash Flow for year 4:

Excel spread sheet:

Finance homework question answer, step 1, image 1
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Step 2

Excel workings:

Finance homework question answer, step 2, image 1
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Step 3

Computation of “x” value: ( x is the bid price of the contract)

...
Finance homework question answer, step 3, image 1
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