ABC Computer, Inc. wants to develop and sell a new kind of computer. This new...
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ABC Computer, Inc. wants to develop and sell a new kind of computer. This new computer is estimated to have a customer selling price of $24,800. ABC thinks they can find customers to buy 1,650 per year of this new computer. ABC now sells 2,000 units of its current computer model per year. If the new computer is introduced, sales of the current computer model will decline to 1,670 units annually. The current computer model sells for $23,200. Variable costs for both the old and new computer models are 54 percent of sales. ABC will need to buy equipment to produce the new computer and this will create an annual amount of depreciation of $975,000. In addition, there will be annual fixed costs of $3,275,000 related to the new computer. ABC has a tax rate of 25 percent. Calculate the amount of the annual operating cash flow for the new computer. (Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.)
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