Question
Kad's Inc has spent $400,000 on research to develop a new computer game. The firm is planning to spend $25,000 on a machine to produce
Kad's Inc has spent $400,000 on research to develop a new computer game. The firm is planning to spend $25,000 on a machine to produce a new game. Shipping and installation costs of the machine will capitalize and depreciate; they total $50,000. The machine has a expected life of 3 years,a $75,000 estimated retail valueand fall under the MACRS 7 year class life. Revenue from the new game is expected to be $600,000 per year which costs of $25,000 per year The firm yhas a taxrate of 35%,an opportunity of cost of capital of 15%and it expects net working capital to increase by $100,000 at the beginning of the project. What will the year 0 free cash flows for the project be?
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