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Your company is planning to bid on a contract to sell 20,000 voice recognition (VR) computer keyboards a year for four years. Due to technological
Your company is planning to bid on a contract to sell 20,000 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, the keyboards will be outdated after four years and no sales will be possible after 4 years. The equipment necessary for the production will cost $4.2 million and will be depreciated straight line to zero over a 5-year period. Production will require an Investment in networking capital of $185,000 immediately and the net working capital is expected to be recovered at the end of the project. The production equipment can be sold for $350,000 at the end of production. The selling price for each keyboard is $235 per unit. Fixed costs are $650,000 per year, and variable costs are $105 per unit. The tax rate is 30 percent, and the required return is 12 percent. You are required to answer the following questions. Please show all your work to receive any credit. a. What is the Initial Outlay from this project? (3 points).
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