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. Year 0 1 2 3 FCF $(350,000.00)
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. Year 0 1 2 3 FCF $(350,000.00)
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
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Transcribed Image Text: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. Year 0 1 2 3 FCF $(350,000.00)
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