Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

KADS, Inc. has spent $370,000 on research to develop a new computer game. The firm is planning to spend $170,000 on a machine to produce

image text in transcribed

KADS, Inc. has spent $370,000 on research to develop a new computer game. The firm is planning to spend $170,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $47,000. The machine has an expected life of three years, a $72,000 estimated resale value, and falls under the MACRS 7-year class life. Revenue from the new game is expected to be $570,000 per year, with costs of $220,000 per year. The firm has a tax rate of 40 percent, an opportunity cost of capital of 11 percent, and it expects net working capital to increase by $85,000 at the beginning of the project. What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) Year 0 1 2 3 FCF $ 222,403.72 $ 231,257.32

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Budget Building Book For Nonprofits

Authors: Murray Dropkin, Jim Halpin, Bill La Touche

2nd Edition

0787996033, 978-0787996031

More Books

Students also viewed these Finance questions

Question

Brief the importance of span of control and its concepts.

Answered: 1 week ago

Question

What is meant by decentralisation?

Answered: 1 week ago

Question

Write down the Limitation of Beer - Lamberts law?

Answered: 1 week ago

Question

Discuss the Hawthorne experiments in detail

Answered: 1 week ago