Your company has spent $310,000 on research to develop a new computer game. The firm is planning to spend $51,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $6,100. The machine has an expected use at your company of 10 years, a $36,000 estimated resale value, and falls under the MACRS 15-Year class life. Revenue from the new game is expected to be $410,000 per year, with costs of $210,000 per year. The firm has a tax rate of 21 percent, an opportunity cost of capital of 12 percent, and it expects net working capital to increase by $61,000 at the beginning of the project. What will be the net cash flow for year one of this project? Multiple Choice $158,000 $600 $158,600 $(57,700)
Your company has spent $310,000 on research to develop a new computer game. The firm is planning to spend $51,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $6,100. The machine has an expected use at your company of 10 years, a $36,000 estimated resale value, and falls under the MACRS 15-Year class life. Revenue from the new game is expected to be $410,000 per year, with costs of $210,000 per year. The firm has a tax rate of 21 percent, an opportunity cost of capital of 12 percent, and it expects net working capital to increase by $61,000 at the beginning of the project. What will be the net cash flow for year one of this project? Multiple Choice $158,000 $600 $158,600 $(57,700)
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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Transcribed Image Text:Your company has spent $310,000 on research to develop a new computer game. The firm is planning to spend $51,000
on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and
depreciated; they total $6,100. The machine has an expected use at your company of 10 years, a $36,000 estimated resale
value, and falls under the MACRS 15-Year class life. Revenue from the new game is expected to be $410,000 per year, with
costs of $210,000 per year. The firm has a tax rate of 21 percent, an opportunity cost of capital of 12 percent, and it
expects net working capital to increase by $61,000 at the beginning of the project. What will be the net cash flow for year
one of this project?
Multiple Choice
$158,000
$600
$158,600
$(57,700)
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