Use the following information to answer Mini Test 9 Problems 1-5

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 Due to technological improvements, beyond that time they will be outdated and no sales will be possible.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

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

$610,000

$284,500

$95,000

$760,000

What is the Operating Cash Flow for year 5?

$610,000

$284,500

$95,000

$760,000

What is the net capital spending for year 5?

$275,000

-$3,800,000

$165,000

-$165,000

What is the project NPV?

-$1,623,290.42

-$1,475,718.56

$1,623,290.42

-$2,655,081.62

What is the project PI?

-.583

.583

-.42

1.68