Question
Your company has spent $200,000 on research to develop a new computer game. The firm is planning to spend $125,000 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 $125,000 on a machine to produce the new game. The machine has an expected life of 3 years, a $25,000 estimated resale value, and falls under the MACRS 5-Year class life. Revenue from the new game is expected to be $130,000 per year, with costs of $90,000 per year. The firm has a tax rate of 30 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?
Year | 5-Year |
1 | 20.00% |
2 | 32.00% |
3 | 19.20% |
4 | 11.52% |
5 | 11.52% |
6 | 5.76% |
Group of answer choices
A: $35,500
B: $39,050
C: $45,375
D: $25,500
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