Capital Budgeting Exercise 2 Your company has spent $400,000 on research to develop a new computer game. The firm is planning to spend $600,000 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 will be used for 3 years, has a $100,000 estimated resale value at the end of three years, and will be depreciated straight line over 4 years. Revenue from the new game is expected to be $800,000 per year, with costs of $300,000 per year. The firm has a tax rate of 35 percent, an opportunity cost of capital of 8 percent, and it expects net working capital to increase by $150,000 at the beginning of the project. Should you proceed with this project? Explain. Year 0 1 2 3 Sales $800,000 $800,000 $800,000 Fixed Costs -$300,000 -$300,000 -$300,000 Depreciation -$216,450 -$289,250 -$96,200 EBIT $283,550 $210,750 $403,800 Taxes -$99,242.5 -$73,762.5 -$141,330 Net Income $184,307.5 $136,987.5 $262,470 Operating Cash Flow $400,757.5 $426,237.5 $358,670 Change in NWC -$150000 $0.00 $0.00 $150,000 Change In Fixed Assets -$300,000 $0.00 $0.00 Total Cash Flow -$450,000 $400,757.5 $426,237.5 $ Should you proceed with this project? Explain. All I need is the change in FA. I don't know what the formula is in order to figure that part out