Project Cash Flows KADS, Inc., has spent $400,000 on research to develop a new computer game. The

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Project Cash Flows KADS, Inc., has spent $400,000 on research to develop a new computer game. The firm is planning to spend $200,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $50,000. The machine has an expected life of three years, a $75,000 estimated resale value, and falls under the MACRS 7-year class life. Revenue from the new game is expected to be $600,000 per year, with costs of $250,000 per year. The firm has a tax rate of 35 percent, an opportunity cost of capital of 15 percent, and it expects net working capital to increase by $100,000 at the beginning of the project. What will the cash flows for this project be? (LG3)

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Finance Applications And Theory

ISBN: 9780073530673

2nd Edition

Authors: Marcia Cornett, Troy Adair, John Nofsinger

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