KADS, Inc. has spent $400,000 on research to develop a new computer game. The firm is planning to spend $200,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $50,000. The machine has an expected life of three years, a $75,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $600,000 per year, with costs of $250,000 per year. The firm has a tax rate of 21 percent, an opportunity cost of capital of 15 percent, and it expects net working capital to increase by $100,000 at the beginning of the project. What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) Year 2 FCF
KADS, Inc. has spent $400,000 on research to develop a new computer game. The firm is planning to spend $200,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $50,000. The machine has an expected life of three years, a $75,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $600,000 per year, with costs of $250,000 per year. The firm has a tax rate of 21 percent, an opportunity cost of capital of 15 percent, and it expects net working capital to increase by $100,000 at the beginning of the project. What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) Year 2 FCF
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 18P
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Question
![KADS, Inc. has spent $400,000 on research to develop a new computer game. The firm is planning to spend $200,000 on a machine
to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $50,000. The
machine has an expected life of three years, a $75,000 estimated resale value, and falls under the MACRS seven-year class life.
Revenue from the new game is expected to be $600,000 per year, with costs of $250,000 per year. The firm has a tax rate of 21
percent, an opportunity cost of capital of 15 percent, and it expects net working capital to increase by $100,000 at the beginning of the
project.
What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2
decimal places.)
Year
1
3
FCF
< Prey
5 of 14
Next >
MacBook Air
80
888
DD
F3
F4
F5
F7
F8
F9
F10
F11
云](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdcd289bd-54ab-4e8a-962a-c9351c6f586f%2Fa5a65024-2b20-4da7-8690-63c590a3fe67%2F72pccc7_processed.jpeg&w=3840&q=75)
Transcribed Image Text:KADS, Inc. has spent $400,000 on research to develop a new computer game. The firm is planning to spend $200,000 on a machine
to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $50,000. The
machine has an expected life of three years, a $75,000 estimated resale value, and falls under the MACRS seven-year class life.
Revenue from the new game is expected to be $600,000 per year, with costs of $250,000 per year. The firm has a tax rate of 21
percent, an opportunity cost of capital of 15 percent, and it expects net working capital to increase by $100,000 at the beginning of the
project.
What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2
decimal places.)
Year
1
3
FCF
< Prey
5 of 14
Next >
MacBook Air
80
888
DD
F3
F4
F5
F7
F8
F9
F10
F11
云
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