KADS, Incorporated has spent $300,000 on research to develop a new computer game. The firmis planning to spend $100,000 on a machine to produce the new game. Shipping and installationcosts of the machine will be capitalized and depreciated using bonus depreciated; they total$40,000. The machine has an expected life of three years, a $65,000 estimated resale value, andfalls under the MACRS seven-year class life. Revenue from the new game is expected to be$500,000 per year, with costs of $150,000 per year. The firm has a tax rate of 21 percent, has anopportunity cost of capital of 13 percent, and expects net working capital to increase by $50,000at the beginning of the project.What will the cash flows for this project be?Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimalplaces.YearFCF$0(190,000.00)Answer is complete but not entirely correct.21279,501.00 $281,643.003390,706.00

Free cash flow is the representation of the cash inflow and outflow in which operating cost and…

Answered: KADS, Incorporated has spent $300,000…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Commercial Hydronics is considering replacing one of its larger control devices. A new unit sells for $32,000 (delivered). An additional $4,000 will be needed to install the device. The new device has an estimated 18-year service life. The estimated salvage value at the end of 18 years will be $2,000. The new control device will be depreciated as a 7-year MACRS asset. The existing control device (original cost = $15,000) has been in use for 9 years, and it has been fully depreciated (that is, its book value equals zero). Its scrap value is estimated to be $2,500. The existing device could be used indefinitely, assuming the firm is willing to pay for its very high maintenance costs. The firm's marginal tax rate is 40 percent. The new control device requires lower maintenance costs and frees up personnel who normally would have to monitor the system. Estimated annual cash savings from the new device will be $5,000. The firm's cost of capital is 10 percent. What is the NPV?
Hardware Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $4,900,000 to buy the machine and $100,000 to have it delivered and installed. The machine is expected to work for five years and raise gross profits by $4,730,000 per year, starting at the end of the first year. Other general expenses associated with using the machine are estimated at $950 thousand for each of those years. The machine will be depreciated over five years using the straight-line method. The marginal tax rate is 40%. What are the incremental free cash flows associated with the new machine in year 0 of the project? Assume the machine is purchased in year 0 and starts depreciating in year 1 of the project.
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.) Need Cash Flows for 3 years
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 7-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? Years 0-4
Finance KADS, Inc. has spent $440,000 on research to develop a new computer game. The firm is planning to spend $240,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $54,000. The machine has an expected life of three years, a $79,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $640,000 per year, with costs of
The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $66,000. The machine would replace an old piece of equipment that costs $17,000 per year to operate. The new machine would cost $8,000 per year to operate. The old machine currently in use is fully depreciated and could be sold now for a salvage value of $29,000. The new machine would have a useful life of 10 years with no salvage value. Required: 1. What is the annual depreciation expense associated with the new bottling machine? 2. What is the annual incremental net operating income provided by the new bottling machine? 3. What is the amount of the initial investment associated with this project that should be used for calculating the simple rate of return? 4. What is the simple rate of return on the new bottling machine? (Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3%.)
KADS, Incorporated, 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 using bonus depreciation; 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, has an opportunity cost of capital of 15 percent, and expects net working capital to increase by $100,000 at the beginning of the project. What will the cash flows for this project be? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.
Market Top Investors, Inc., is considering the purchase of a $345,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method, at which time it will be worth $60,000. The computer will replace two office employees whose combined annual salaries are $86,000. The machine will also immediately lower the firm's required net working capital by $75,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 25 percent. The appropriate discount rate is 8 percent. Calculate the NPV of this project. show work step by step
KADS, Incorporated has spent $300,000 on research to develop a new computer game. The firm is planning to spend $100,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated using bonus depreciated; they total $40,000. The machine has an expected life of three years, a $65,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $500,000 per year, with costs of $150,000 per year. The firm has a tax rate of 21 percent, has an opportunity cost of capital of 13 percent, and expects net working capital to increase by $50,000 at the beginning of the project. What will the cash flows for this project be? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Year FCF 0 (190,000.00) ✔ X Answer is not complete. 1 2 $ 3 390,706.20
Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price is $200,000, and installation costs would amount to $28,000. Also, $10,000 in net working capital would be required at installation. The machine will be depreciated for 3 years using simplified straight line depreciation. The machine would save the firm $110,000 per year in operating costs. The firm is planning to keep the machine in place for 2 years. At the end of the second year, the machine will be sold for $100,000. Riverview has a cost of capital of 12% and a marginal tax rate of 34%. What is the NPV of the project? -$9.783 $3,875 O$9,555 $12,155 $19,016
KADS, Inc. has spent $300,000 on research to develop a new computer game. The firm is planning to spend $100,000 on a machine to produce the new game. Shipping and Installation costs of the machine will be capitalized and depreciated; they total $40,000. The machine has an expected life of three years, a $65,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $500,000 per year, with costs of $150,000 per year. The firm has a tax rate of 21 percent, an opportunity cost of capital of 13 percent, and it expects net working capital to Increase by $50,000 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 FCF (190,000 00)
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 using bonus depreciation; they total $50,000. The machine has an expected life of three years and a $75,000 estimated resale value. 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?

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