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Your company has spent $200,000 on research to develop a new computer game. The firm is planning to spend $40,000 on a machine to produce
Your company has spent $200,000 on research to develop a new computer game. The firm is planning to spend $40,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $5,000. The machine has an expected life of five years, a $25,000 estimated resale value, and falls under the MACRS five-year class life. Revenue from the new game is expected to be $300,000 per year, with costs of $100,000 per year. The firm has a tax rate of 21 percent, an opportunity cost of capital of 14 percent, and it expects net working capital to increase by $50,000 at the beginning of the project. What will be the operating cash flow for year one of this project? Multiple Choice $150,890 $3,150 $159,890 -$49,150
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