KADS, Inc. has spent $$400,000$ on research to develop a new computer game. The firm is planning to spend $$200,000$ on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $$50,000.$ The machine has an expected life of three years, a $$75,000$ estimated resale value, and falls under the MACRS $7-$year class life. Revenue from the new game is expected to be $$600,000$ per year, with costs of $$250,000$ per year. The firm has a tax rate of $35$ percent, KADS has an opportunity cost of capital of $15$ percent, and it expects net working capital to increase by $$100,000$ at the beginning of the project.

Q$\mathrm{.}1$ What will the cash flows for this project be$?$

Q$\mathrm{.}2$ According to the Management Report, should KADS go forward with the project?

NPV $-$ Investment Analysis

$**$Need to determine the appropriate value to input for each designated cell to determine final calculations$**$