4. Your company has spent $370,000 on research to develop a new computer game. The firm is planning to spend $57,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $6,700. The machine has an expected life of 5 years, a $42,000 estimated resale value, and falls under the MACRS 7-Year class life. Revenue from the new game is expected to be $470,000 per year, with costs of $270,000 per year. The firm has a tax rate of 40 percent, an opportunity cost of capital of 15 percent, and it expects net working capital to increase by $67,000 at the beginning of the project. What will be the net cash flow for year one of this project?

5. Cash flows for Project Y is given below and the appropriate cost of capital is 11 percent.

Project Y

TIME 0 1 2 3 4

Cash Flow $ 11,400 $ 3,320 $ 3,280 $ 1,490 $ 1,950

Compute the NPV for Project Y. Using the NPV decision rule should the project be accepted or rejected? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

6. Cash flows for Project U is given below and the appropriate cost of capital is 10 percent.

Project U

TIME 0 1 2 3 4 5

Cash Flow $ 1,000 $ 350 $ 1,480 $ 520 $ 300 $ 100

Compute the NPV for Project U. Using the NPV decision rule, should the project be accepted or rejected? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

7. The cash flows for Project A is shown below with the appropriate cost of capital at 11.5 percent and the maximum allowable payback is four years.

Project A

TIME 0 1 2 3 4 5

Cash Flow $ 980 $ 160 $ 420 $ 660 $ 210 $ 290

Compute the payback period for Project A. Should the project be accepted or rejected?