### Business Investment Analysis: KADS, Inc.**Project Overview:**KADS, Inc. has embarked on developing a new computer game, investing $400,000 in research. The company plans to spend an additional $200,000 on a machine for production. Shipping and installation costs, which will be capitalized and depreciated, amount to $50,000. The machine's expected life span is three years, with a $75,000 estimated resale value. Depreciation aligns with the MACRS seven-year class life.**Financial Projections:**- **Revenue:** The new game is projected to generate $600,000 annually.- **Costs:** Expected annual costs are $250,000.- **Tax Rate:** The firm is taxed at 21%.- **Working Capital:** Initial increase of $100,000.- **Opportunity Cost:** Capital cost is evaluated at 15%.**Cash Flow Analysis:**This section forecasts cash flows across three years.| Year | Free Cash Flow (FCF) ||------|----------------------|| 0 | $(350,000.00) || 1 | $240,003.75 || 2 | $289,357.25 || 3 | $467,890.50 |*Negative figures indicate an outflow of cash.***Notes:**- The answer status indicates partial correctness; revisions may be needed for precise analysis.- Cash flow calculations are critical for assessing project viability and future financial health.This table and analysis help students understand the intricacies of project investment decisions and the importance of accurate financial forecasting in business strategy.

Net present value is the excess of present value of inflows to the outflows. NPV = Present value of…

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 $100,000 at the beginning of the project. What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) X Answer is complete but not entirely correct. Year FCF 2$ (350,000.00) O $ 240,003.75 X $ 289,357.25 O $ 467,890.50 X

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 $100,000 at the beginning of the project. What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) X Answer is complete but not entirely correct. Year FCF 2$ (350,000.00) O $ 240,003.75 X $ 289,357.25 O $ 467,890.50 X

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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