KADS, Incorporated has spent $320,000 on research to develop a new computer game. The firm is planning to spend $120,000 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 $42,000. The machine has an expected life of three years, a $67,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $520,000 per year, with costs of $170,000 per year. The firm has a tax rate of 21 percent, has an opportunity cost of capital of 12 percent, and expects net working capital to increase by $60,000 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 1 2 3
KADS, Incorporated has spent $320,000 on research to develop a new computer game. The firm is planning to spend $120,000 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 $42,000. The machine has an expected life of three years, a $67,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $520,000 per year, with costs of $170,000 per year. The firm has a tax rate of 21 percent, has an opportunity cost of capital of 12 percent, and expects net working capital to increase by $60,000 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 1 2 3
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 4P
Related questions
Question
![KADS, Incorporated has spent $320,000 on research to develop a new computer game. The firm is planning to spend $120,000 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 $42,000. The machine has an expected life of three years, a $67,000 estimated resale value, and falls under
the MACRS seven-year class life. Revenue from the new game is expected to be $520,000 per year, with costs of $170,000 per year.
The firm has a tax rate of 21 percent, has an opportunity cost of capital of 12 percent, and expects net working capital to increase by
$60,000 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
1
2
3](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5891e40a-0ff9-4f2e-83eb-e00724fd2cb7%2F9c595cf2-4370-41c4-9748-b2fc9ed655a5%2Fsuwxe3_processed.png&w=3840&q=75)
Transcribed Image Text:KADS, Incorporated has spent $320,000 on research to develop a new computer game. The firm is planning to spend $120,000 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 $42,000. The machine has an expected life of three years, a $67,000 estimated resale value, and falls under
the MACRS seven-year class life. Revenue from the new game is expected to be $520,000 per year, with costs of $170,000 per year.
The firm has a tax rate of 21 percent, has an opportunity cost of capital of 12 percent, and expects net working capital to increase by
$60,000 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
1
2
3
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 4 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Intermediate Financial Management (MindTap Course…](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Intermediate Financial Management (MindTap Course…](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
![Fundamentals Of Financial Management, Concise Edi…](https://www.bartleby.com/isbn_cover_images/9781337902571/9781337902571_smallCoverImage.jpg)
Fundamentals Of Financial Management, Concise Edi…
Finance
ISBN:
9781337902571
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning