Answered step by step
Verified Expert Solution
Question
1 Approved Answer
KADS, Inc. has spent $410,000 on research to develop a new computer game. The firm is planning to spend $210,000 on a machine to produce
KADS, Inc. has spent $410,000 on research to develop a new computer game. The firm is planning to spend $210,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $51,000. The machine has an expected life of three years, a $76,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $610,000 per year, with costs of $260,000 per year. The firm has a tax rate of 21 percent, an opportunity cost of capital of 11 percent, and it expects net working capital to increase by $105,000 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.) Answer is complete but not entirely correct. Year 0 1 2 3 FCF $ (366,000.00) $ 224,918.76 X $ 235,576.56 $ 424,513.68 X
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started