Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your company is planning to spend $50,000 on a machine to produce a new computer game. Shipping and installation costs of the machine will be

Your company is planning to spend $50,000 on a machine to produce a new computer game. Shipping and installation costs of the machine will be $2,500. The machine has an expected life of 6 years, a $29,000 estimated resale value, and falls under the MACRS 5-Year class life. Revenue from the new game is expected to be $39,000 per year, with costs of $13,000 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 $2,500 at the beginning of the project. What will be the operating cash flow (OCF) for year one of this project? The 5-year MACRS rates are: 20.00% for year 1; 32.00% for year 2; 19.20% for year 3; 11.52% for year 4; 11.52% for year 5; and 5.76% for year 6.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Quantitative Analysis for Management

Authors: Barry Render, Ralph M. Stair, Michael E. Hanna, Trevor S. Ha

12th edition

133507335, 978-0133507331

More Books

Students also viewed these Finance questions