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 using bonus depreciation; they total $50,000. The machine has an expected life of three years and a $75,000 estimated resale value. Revenue from the new game is expected to be $600,000 per year, with fixed costs of $250,000 per year. The firm has a tax rate of 21 percent, 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. 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.)

FCF for year 0-3?

Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans. You will be replacing five fully-depreciated vans, which you think you can sell for $3,000 a piece and which you could probably use for another 2 years if you chose not to replace them. The NV vans will cost $29,850 each in the configuration you want them, and can be depreciated using MACRS over a 5-year life, but you are unable to make use of either bonus depreciation or Section 179 expensing. Expected yearly before-tax cash savings due to acquiring the new vans amounts to about $3,700 each. If your cost of capital is 8 percent and your firm faces a 21 percent tax rate, what will the cash flows for this project be? (Round your answers to the nearest dollar amount.)

FCF Year 0-6?

Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3 and 3.5 years, respectively.

Time:	0	1	2	3	4	5
Cash flow:	$265,000	$59,800	$78,000	$129,000	$116,000	$75,200

Use the MIRR decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

MIRR =

Should it be accepted or rejected?

• rejected

• accepted