I know this has been posted before with different numbers and I can not get it t

Question

I know this has been posted before with different numbers and I can not get it to work. Can you please help me figure out the operating cash flow.

NPV. Grady Precision Measurement Tools has forecasted the following sales and costs for new GPS system annual sales of 45,000 units at $17 a unit, production costs at 39% of sales price, annual fixed costs for production at $180,000. The company tax rate is 30%. What is the annual operating cash flow of the new GPA system? Should Grady Precision Measurement Tools add the GPS system to its set of products? The initial investment is $1,400,000 and is depreciated over six years (straight line) and will be sold at the end of five years for $380,000. The cost of capital is 10%

What is the annual operating cash flow of the new GPS system? (Round to the nearest dollar.)

What is the after-tax cash flow of the GPS system at disposal? (Round to the nearest dollar.)

What is the NPV of the new GPS system? (Round to the nearest dollar.)

Explanation / Answer

Annual operating cash flow = $270,655.00

After tax cash flow of the GPS system at disposal = cash flow in that year + Net after tax Cash flow from the machine sale =   $270,655.00 + $336000

= $606,655

NPV of the new GPS system = -$150,341. Hence this project shouldn't be taken up by the company.

For calculations find the table below.

Cash flows Cost of machine $ 14,00,000.00 Year 0     -14,00,000.00 Revenue = 45000 units*$17 per units = $    7,65,000.00 Year 1 $     2,70,655.00 Cost of goods sold = 39% sales $    2,98,350.00 Year 2 $     2,70,655.00 Annual Fixed costs $    1,80,000.00 Year 3 $     2,70,655.00 Tax rate 30% Year 4 $     2,70,655.00 Depreciation over this many years 6.00 Year 5 $     6,06,655.00 Depreciation per year $    2,33,333.33 NPV $   -1,50,340.95 Reportable income $       53,316.67 Taxes $       15,995.00 Net income $       37,321.67 Cash flow from operations or after tax cash flow = Net income+ depriciation = $    2,70,655.00 Book value of the machine at the end of 5 years 233333.3 Market value of the machine 380000 taxable gain 146666.7 taxes 44000 Net after tax Cash flow from the machine sale 336000

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