Question
KADS, Incorporated has spent $310,000 on research to develop a new computer game. The firm is planning to spend $110,000 on a machine to produce
KADS, Incorporated has spent $310,000 on research to develop a new computer game. The firm is planning to spend $110,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated using bonus depreciated; they total $41,000. The machine has an expected life of three years, a $66,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $510,000 per year, with costs of $160,000 per year. The firm has a tax rate of 21 percent, has an opportunity cost of capital of 11 percent, and expects net working capital to increase by $55,000 at the beginning of the project. What will the cash flows for this project be? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.
I have posted this question twice and the cash flows for year 3 have been wrong.
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