Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

KADS, Inc., has spent $390,000 on research to develop a new computer game. The firm is planning to spend $190,000 on a machine to produce

KADS, Inc., has spent $390,000 on research to develop a new computer game. The firm is planning to spend $190,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $49,000. The machine has an expected life of three years, a $74,000 estimated resale value, and falls under the MACRS 7-year class life. Revenue from the new game is expected to be $590,000 per year, with costs of $240,000 per year. The firm has a tax rate of 40 percent, an opportunity cost of capital of 13 percent, and it expects net working capital to increase by $95,000 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 $ $ $ $

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 Certified Lease And Finance Professionals Handbook

Authors: Deborah Reuben, Certified Lease & Finance Professionals, Equipment Finance Industry Experts

6th Edition

171743388X, 978-1717433886

More Books

Students also viewed these Finance questions

Question

=+ (c) The same, but suppose that 22 is uncountable.

Answered: 1 week ago

Question

4-6 Is there a digital divide? If so, why does it matter?

Answered: 1 week ago