Question
KADS, Incorporated has spent $340,000 on research to develop a new computer game. The firm is planning to spend $140,000 on a machine to produce
KADS, Incorporated has spent $340,000 on research to develop a new computer game. The firm is planning to spend $140,000 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 $44,000. The machine has an expected life of three years, a $69,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $540,000 per year, with costs of $190,000 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 $70,000 at the beginning of the project.
What will the cash flows for this project be?
Please Note: yr.0 is -254,000 However, most are saying that year 1,2,3, have the same number but it is incorrect, these number that are wrong are Year 1 / 220,517.44 Year 2/ 228,024.64 Year 3/ 366,457.92. I tried these numbers both positive and negative and they are showing incorrect. Please help me thank you
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