Question

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 Due to technological improvements, beyond that time they will be outdated and no sales will be possible.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.

Expert Solution

Want to see the full answer?

Check out a sample Q&A here
Blurred answer
Students who’ve seen this question also like:
Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
4th Edition
ISBN: 9781111581565
Author: Gaylord N. Smith
Publisher: Cengage Learning
Not helpful? See similar books
Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
Capital Budgeting (capbud). 5R
marketing sidebar icon
Want to see this answer and more?
Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*
*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.

Related Finance Q&A

Find answers to questions asked by students like you.

Q: Your company has been approached to bid on a contract to sell 21,000 voice recognition (VR) computer…

A: As per the details provided in the question, following are the required calculation where selling…

Q: A design firm is considering investing in a software suite that costs $200,000. It estimates that…

A: solution  concept : present worth is calculated as the the present value of inflow less present…

Q: A design firm is considering investing in a software suite that costs $200,000. It estimates that…

A: Present value of annuity is the current value of the future payments that are calculated using the…

Q: You are in the mail-order business, selling computer peripherals, including high-speed Internet…

A: Net present worth analysis is an analysis in which we convert all the cash flows to present worth…

Q: You are in the mail-order business, selling computer peripherals, includinghigh-speed Internet…

A: Net present value is one of the capital budgeting techniques. When a company is willing to invest in…

Q: You are a manager at Percolated Fiber, which is considering expanding its operations in synthetic…

A: Introduction: Free cash flow (FCF) refers to the cash available with the company after bearing all…

Q: You are considering adding a new software title to those published by your highly successful…

A: Opportunity costs refers to the benefits a business misses when the management chooses one…

Q: You are considering adding a new software title to those published by your highly successful…

A: Calculate the Opportunity cost as follows:

Q: A small company that manufactures vibration isolation platforms is trying to decide whether it…

A: With the passage of time, old equipment or assets become less efficient and profitable. These old…

Q: A small company that manufactures vibration isolation platforms is trying to decide whether it…

A: Amount ($) Cost of the new machine (C) Less: Sale proceeds of old components (D)…

Q: You are in the mail-order business and you are considering upgrading your mail ordering system to…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: You are a manager at Northem Fibre, which is considering expanding its operations in synthetic fibre…

A: Free Cash Flow: It is the amount by which  operating cash flow  of business exceeds its working…

Q: Smart Manufacturing Company is planning to reduce its labor costs by automating a critical task that…

A: Capital Budgeting Techniques helps to decide the investment project that should be selected.

Q: The management of Kimco is evaluating the possibility of replacing their large mainframe computer…

A: Net present value is the difference between the present value of cash inflows and present value of…

Q: You just purchased a pin-inserting machine to relieve some bottleneck problems that have been…

A: Calculate the capital recovery cost as follows:

Q: Dwight Donovan, the president of Fanning Enterprises, is considering two investment opportunities.…

A: in this we have to calculate net present value of both option and option with more net present value…

Q: You are a manager at Northern Fibre, which is considering expanding its operations in synthetic…

A: To calculate the value of project, it is required to calculate the net present value of Project…

Q: A logistic company is considering using automated guided vehicles (AGVS) system to speed up the…

A: Maximum Price of an equipment is the present value of free cash flows generated by the equipment.

Q: A logistic company is considering using automated guided vehicles (AGVS) system to speed up the…

A: Maximum Price that can be paid for the equipment is based on present value of free cash flows…

Q: 'ou are a manager at Northern Fibre, which is considering expanding its operations in synthetic…

A: Here, Cost of Project is $24 millions Net Income of Project is $4.732 million Depreciation is 2.400…

Q: Garrett Boone, Bridgeport Enterprises' vice president of operations, needs to replace an automatic…

A: Please find the answers to the above questions below:

Q: A Company is seeking financial advice as to whether to replace its old equipment. Some of its…

A: NPV is a capital budgeting method by which we can decide that whether we should go ahead with the…

Q: A Company is seeking financial advice as to whether to replace its old equipment. Some of its…

A: Answer 31)

Q: Recycltoy Inc. is a company that produces recycled toys. The company is examining an investment in a…

A: Click to see the answer

Q: Howard Weiss, Inc., is considering building a sensitive new radiation scanning device. His managers…

A: Based on the information given in the question, we can summarize the given alternatives as mentioned…

Q: https://ezto-cf-media.mheducation.com/Media/Connect_Production/bne/accounting/edmonds_fmac_9e/pv_of_…

A: Net present value method (NVP): Net present value method is the method which is used to compare the…

Q: https://ezto-cf-media.mheducation.com/Media/Connect_Production/bne/accounting/edmonds_fmac_9e/pva_of…

A: (a) Calculation of net present value:

Q: Garrett Boone, Ayayai Enterprises’ vice president of operations, needs to replace an automatic lathe…

A: (a) Calculate the present value of annuity factor of $ 1: present value of annuity factor of $ 1 =…

Q: Dexter Inc. is considering replacing its existing computer system with a new computer system. The…

A: Answer - No do not replace, additional costs of $3,500. Working In the existing computer system…

Q: Garrett Boone, Grouper Enterprises’ vice president of operations, needs to replace an automatic…

A: Calculating the total cash inflow from the new automatic lathe machine. We have,

Q: It has been several years since your office last upgraded its office networking software. Two…

A: Net present value is the difference between then discounted cash outflows and inflows.

Q: Raytheon wishes to use an automated environmental chamber in the manufacture of electronic…

A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: Four years ago, your company upgraded its IT infrastructure at a cost of $50,000. Its current…

A: Click to see the answer

Q: Novak Fashions needs to replace a beltloop attacher that currently costs the company $58,000 in…

A: Accounting rate of return = Average annual income / Average investment =8,766/44,936 = 19.51%

Q: Novak Fashions needs to replace a beltloop attacher that currently costs the company $58,000 in…

A: Accounting rate of return The accounting rate of return is the return that is calculated by equating…

Q: Stanton Inc. is considering adding a new product line (the product code is XYZ). The company has…

A: “Since you have posted a question with multiple sub-parts, we will solve the first three sub- parts…

Q: Suppose we are thinking about replacing an old computer with a new one. The old one cost us…

A: Formula used for calculating EAC is:

Q: It is planning to reduce its labor costs by automating a critical task that is currently performed…

A: Present value means the actual amount is adjusted with the interest rate so as to get the present…

Q: A multinational engineering consulting firm that wants to provide resort accommodations to special…

A: Future value is the worth of amount in the future date if the amount is adjusted with the discount…

Q: Denny Corporation is considering replacing a technologically obsolete machine with a new…

A: Simple rate of return = Annual incremental net operating income/Initial investment

Q: Denny Corporation is considering replacing a technologically obsolete machine with a new…

A: Simple rate of return: Is the incremental amount of net income from an investment divided by the…

Q: Dwight Donovan, the president of Donovan Enterprises, is considering two investment opportunities.…

A: Click to see the answer

Q: A manufacturer is considering replacing a production machine tool. The new machine, costing $40,000,…

A: The replacement of a capital asset is a capital budgeting decision that involves an appraisal of the…

Q: A manufacturer is considering replacing a production machine tool. The new machine, costing $40,000,…

A: Annual cash flow means the cash flow which are going to be received from the investment or project…

Q: The Faster Modem Corporation was founded by two engineers whomanaged to capitalize their firm with…

A: The question is based on the concept of no operation condition of a company. This is an ideal…

Q: A software package created by Navarro & Associates can be used for analyzing and designing…

A: Present worth is the current value of a future sum of money or stream of cashflows given a…

Q: Dominik Corporation purchased a machine 5 years ago for $527,000 when it launched product M08Y.…

A: A manager should always make decisions for the future based on the comparison made between the two…

Q: Marigold Corp. has several outdated computers that cost a total of $17800 and could be sold as scrap…

A: It is pertinent to note that book value of outdated equipment is nothing but residual value or scrap…

Q: A paving company is considering selling their lab faciltities and outsourcing their QC (Quality…

A: Initial cash inflow from selling = 1 million/ 1,000 k cash outflow per year = 140 - 45 k = 95k…

Q: Bailey, Inc., is considering buying a new gang punch that would allow it to produce circuit boards…

A: Discounted Pay-Back Period(DPBP) shows period in which initial outlay of an proposal is fully…

Knowledge Booster
Finance
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • Austins cell phone manufacturer wants to upgrade their product mix to encompass an exciting new feature on their cell phone. This would require a new high-tech machine. You are excited about his new project and are recommending the purchase to your board of directors. Here is the information you have compiled in order to complete this recommendation: According to the information, the project will last 10 years and require an initial investment of $800,000, depreciated with straight-line over the life of the project until the final value is zero. The firms tax rate is 30% and the required rate of return is 12%. You believe that the variable cost and sales volume may be as much as 10% higher or lower than the initial estimate. Your boss understands the risks but asks you to explain the alternatives in a brief memo to the board, Write a memo to the Board of Directors objectively weighing out the pros and cons of this project and make your recommendation(s).
    At Stardust Gems, a faux gem and jewelry company, the setting department is a bottleneck. The company is considering hiring an extra worker, whose salary will be $67,000 per year, to ease the problem. Using the extra worker, the company will be able to produce and sell 9,000 more units per year. The selling price per unit is $20. The cost per unit currently is $15.85 as shown: What is the annual financial impact of hiring the extra worker for the bottleneck process?
    Boxer Production, Inc., is in the process of considering a flexible manufacturing system that will help the company react more swiftly to customer needs. The controller, Mick Morrell, estimated that the system will have a 10-year life and a required return of 10% with a net present value of negative $500,000. Nevertheless, he acknowledges that he did not quantify the potential sales increases that might result from this improvement on the issue of on-time delivery, because it was too difficult to quantify. If there is a general agreement that qualitative factors may offer an additional net cash flow of $150,000 per year, how should Boxer proceed with this Investment?
  • Shonda & Shonda is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1.200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are as follows: A. What will be the impact on the break-even point if Shonda & Shonda purchases the new computer? B. What will be the impact on net operating income if Shonda & Shonda purchases the new computer? C. What would be your recommendation to Shonda & Shonda regarding this purchase?
    Your company has been approached to bid on a contract to sell 5,200 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 $4.8 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 $105,000 to be returned at the end of the project and the equipment can be sold for $285,000 at the end of production. Fixed costs are $650,000 per year, and variable costs are $165 per unit. In addition to the contract, you feel your company can sell 10,500, 11,400, 13,500, and 10,800 additional units to companies in other countries over the next four years, respectively, at a price of $360. This price is fixed. The tax rate is 25 percent, and the required return is 13 percent. Additionally, the president of the company will only undertake the project…
    Your company has been approached to bid on a contract to sell 21,000 voice recognition (VR) computer keyboards per 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 $4,200,000 and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $150,000 to be returned at the end of the project, and the equipment can be sold for $270,000 at the end of production. Fixed costs are $805,000 per year and variable costs are $45 per unit. In addition to the contract, you feel your company can sell 4,800, 12,400, 14,400, and 7,700 additional units to companies in other countries over the next four years, respectively, at a price of $130. This price is fixed. The tax rate is 25 percent, and the required return is 11 percent. Additionally, the president of the company will undertake the project only…
  • You are in the mail-order business, selling computer peripherals, including high-speed Internet cables, various storage devices such as memory sticks, and wireless networking devices. You are considering upgrading your mail ordering system to make your operations more efficient and to increase sales. The computerized ordering system will cost $250,000 to install and $50,000 to operate each year. The system is expected to last eight years with no salvage value at the end of the service period. The new order system will save $120,000 in operating costs (mainly, reduction in inventory carrying cost) each year and bring in additional sales revenue in the amount of $40,000 per year for the next eight years. If your interest rate is 12%,justify your investment using the NPW method.
    You are a manager at Percolated Fiber, which is considering expanding its operations in synthetic fiber manufacturing. Your boss comes into your office, drops a consultant’s report on your desk, and complains, "We owe these consultants $1 million for this report, and I am not sure their analysis makes sense. Before we spend the $25 million on the new equipment needed for this project, look it over and give me your opinion." You open the report and find the following estimates (in thousands of dollars) for the project:       Project year       1 2 … 9 10 Sales revenue 30,000 30,000   30,000 30,000 - Cost of goods sold 18,000 18,000   18,000 18,000 =Gross profit 12,000 12,000   12,000 12,000 - Gen, sales and admin expenses 2,000 2,000   2,000 2,000 - Depreciation 2,500 2,500   2,500 2,500 =Net operating income 7,500 7,500   7,500 7,500 - Income tax 2,625 2,625   2,625 2,625 =Net Income…
    You are a manager at Percolated​ Fiber, which is considering expanding its operations in synthetic fiber manufacturing. Your boss comes into your​ office, drops a​ consultant's report on your​ desk, and​ complains, "We owe these consultants $1.2 million for this​ report, and I am not sure their analysis makes sense. Before we spend the $19 million on new equipment needed for this​ project, look it over and give me your​ opinion." You open the report and find the following estimates​ (in millions of​ dollars):   All of the estimates in the report seem correct. You note that the consultants used​ straight-line depreciation for the new equipment that will be purchased today​ (year 0), which is what the accounting department recommended. The report concludes that because the project will increase earnings by $6.864 million per year for ten​ years, the project is worth $68.64 million. You think back to your halcyon days in finance class and realize there is more work to be​ done!   First,…
  • You are a manager at Percolated​ Fiber, which is considering expanding its operations in synthetic fiber manufacturing. Your boss comes into your​ office, drops a​ consultant's report on your​ desk, and​ complains, "We owe these consultants $1.3 million for this​ report, and I am not sure their analysis makes sense. Before we spend the $22 million on new equipment needed for this​ project, look it over and give me your​ opinion." You open the report and find the following estimates​ (in millions of​ dollars):  All of the estimates in the report seem correct. You note that the consultants used​ straight-line depreciation for the new equipment that will be purchased today​ (year 0), which is what the accounting department recommended. The report concludes that because the project will increase earnings by $5.472 million per year for ten​ years, the project is worth $54.72 million. You think back to your halcyon days in finance class and realize there is more work to be​ done!  ​First,…
    You are a manager at Percolated​ Fiber, which is considering expanding its operations in synthetic fiber manufacturing. Your boss comes into your​ office, drops a​ consultant's report on your​ desk, and​ complains, "We owe these consultants $1.3 million for this​ report, and I am not sure their analysis makes sense. Before we spend the $22 million on new equipment needed for this​ project, look it over and give me your​ opinion." You open the report and find the following estimates​ (in millions of​ dollars):    All of the estimates in the report seem correct. You note that the consultants used​ straight-line depreciation for the new equipment that will be purchased today​ (year 0), which is what the accounting department recommended. The report concludes that because the project will increase earnings by $5.472 million per year for ten​ years, the project is worth $54.72 million. You think back to your halcyon days in finance class and realize there is more work to be​ done!  ​First,…
    You work for a logistics company, which considers to invest in a computerized system to improve efficiency. The initial cost of implementation for the system is $90,000. Furthermore, it will cost $25,000 per year to maintain the system. Due to the fast nature of the business, your company can use the system for five years and there will be no salvage value at the end of the service period. Thanks to the new system, you estimate that the company will save $65,000 in operating costs each year. In addition, the increase in the effciency would bring $35,000 per year in additional revenues during the service life of the system. Given that your company's MARR is 15%, find the present worth of this investment. A) -$73,239 B) $161,412 C) $251,412 D) Answers A, B and C are not correct
    • SEE MORE QUESTIONS
    Recommended textbooks for you
  • Excel Applications for Accounting Principles
    Accounting
    ISBN:9781111581565
    Author:Gaylord N. Smith
    Publisher:Cengage Learning
    Principles of Accounting Volume 2
    Accounting
    ISBN:9781947172609
    Author:OpenStax
    Publisher:OpenStax College
    Essentials of Business Analytics (MindTap Course ...
    Statistics
    ISBN:9781305627734
    Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
    Publisher:Cengage Learning
  • Managerial Accounting: The Cornerstone of Busines...
    Accounting
    ISBN:9781337115773
    Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
    Publisher:Cengage Learning
    Cornerstones of Cost Management (Cornerstones Ser...
    Accounting
    ISBN:9781305970663
    Author:Don R. Hansen, Maryanne M. Mowen
    Publisher:Cengage Learning
    Corporate Fin Focused Approach
    Finance
    ISBN:9781285660516
    Author:EHRHARDT
    Publisher:Cengage
  • Excel Applications for Accounting Principles
    Accounting
    ISBN:9781111581565
    Author:Gaylord N. Smith
    Publisher:Cengage Learning
    Principles of Accounting Volume 2
    Accounting
    ISBN:9781947172609
    Author:OpenStax
    Publisher:OpenStax College
    Essentials of Business Analytics (MindTap Course ...
    Statistics
    ISBN:9781305627734
    Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
    Publisher:Cengage Learning
    Managerial Accounting: The Cornerstone of Busines...
    Accounting
    ISBN:9781337115773
    Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
    Publisher:Cengage Learning
    Cornerstones of Cost Management (Cornerstones Ser...
    Accounting
    ISBN:9781305970663
    Author:Don R. Hansen, Maryanne M. Mowen
    Publisher:Cengage Learning
    Corporate Fin Focused Approach
    Finance
    ISBN:9781285660516
    Author:EHRHARDT
    Publisher:Cengage