Your company has been approached to bid on a contract to sell 4,500 voice recognition (VR) computer keyboards per year for 5 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 Due to technological improvements, beyond that time they will be outdated and no sales will be possible.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 $3.8 million and will be depreciated on a straight-line basis to a zero salvage value over the five years of the project. Production will require an investment in net working capital of $95,000 to be returned at the end of the project, and the equipment can be sold for $275,000 at the end of production. Fixed costs are $640,000 per year, and variable costs are $155 per unit. In addition to the contract, you feel your company can sell 3,500 additional units to companies in other countries each year over the next four years at a price of $310. This price is fixed. The tax rate is 40 percent, and the required return is 10 percent. The bid price you plan to submit is $290 per unit.

A. What is the Operating Cash Flow for the first four years of the project?

a. $610,000

b. $284,500

c. $95,000

d. $760,000

B. What is the Operating Cash Flow for year 5?

a. $610,000

b. $284,500

c. $95,000

d. $760,000

C. What is the net capital spending for year 5?

a. $275,000

b. -$3,800,000

c. $165,000

d. -$165,000

D. What is the project NPV?

a. -$1,623,290.42

b. -$1,475,718.56

c. $1,623,290.42

d. -$2,655,081.62

E. What is the project PI?

a. -.583

b. .583

c. -.42

d. 1.68