Question
22.Your company has spent $260,000 on research to develop a new computer game. The firm is planning to spend $46,000 on a machine to produce
22.Your company has spent $260,000 on research to develop a new computer game. The firm is planning to spend $46,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $5,600. The machine has an expected life of 7 years, a $31,000 estimated resale value, and falls under the MACRS 10-Year class life. Revenue from the new game is expected to be $360,000 per year, with costs of $160,000 per year. The firm has a tax rate of 35 percent, an opportunity cost of capital of 13 percent, and it expects net working capital to increase by $56,000 at the beginning of the project. What will be the net cash flow for year one of this project? -$53,406 $1,806 $130,000 $131,806
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