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Your company has spent $200,000 on research to develop a new computer game. The firm is planning to spend $85,000 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 $85,000 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 $95,000 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%

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$10,750

$8,600

-$20,400

-$8,400

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