Jellybean Manufacturing (hence, JM) has the opportunity to supply handheld computers to horse supply companies. A year ago, JM spent $1 million to develop a prototype for the new computers. From previous experience, JM expects the computers will remain on the market for 3 years after which it will be replaced by an upgraded model. This past year, the company spent an additional $500,000 for a marketing study to help estimate expected sales figures. JM can manufacture the new computers for $195 each in variable costs. Fixed costs for the manufacturing operation are estimated to run $6.0 million per year. The estimated sales volume (units) is 220,000, 150,000, and 100,000 per year for the next 3 years, respectively. The unit selling price of the new computer will be $525. The equipment that is necessary to manufacture the computers can be purchased for $30.0 million and will be depreciated straight-line over 3 years to a salvage value of $3.0 million. JM would need to increase its working capital by $3 million initially but would recover it at the end of the third year when production of the computer line would cease. The Computing Company (CC) has offered to manufacture the computers for JM for $400 each. Regardless if JM manufactures the computers or purchases them from CC, the selling price will remain $525. JM has a cost of capital of 12% and a tax rate of 30%. What is the cash flow for year 1 (CF1) if JM buys the computers from CC?

$18,750,000

$25,000,000

$15,700,000

$21,250,000

$19,250,000