KADS, Incorporated has spent $410,000 on research to develop a new computer game. The firm is planning to spend $210,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $51,000. The machine has an expected life of three years, a $76,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $610,000 per year, with costs of $260,000 per year. The firm has a tax rate of 21 percent, has an opportunity cost of capital of 11 percent, and expects net working capital to increase by $105,000 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 $410,000 on research to develop a new computer game. The firm is planning to spend $210,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $51,000. The machine has an expected life of three years, a $76,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $610,000 per year, with costs of $260,000 per year. The firm has a tax rate of 21 percent, has an opportunity cost of capital of 11 percent, and expects net working capital to increase by $105,000 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
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:KADS, Incorporated has spent $410,000 on research to develop a new computer game. The firm is planning to spend $210,000 on a
machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total
$51,000. The machine has an expected life of three years, a $76,000 estimated resale value, and falls under the MACRS seven-year
class life. Revenue from the new game is expected to be $610,000 per year, with costs of $260,000 per year. The firm has a tax rate of
21 percent, has an opportunity cost of capital of 11 percent, and expects net working capital to increase by $105,000 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
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