KADS, Incorporated has spent $340,000 on research to develop a new computer game. The firm is planning to spend $140,000 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 $44,000. The machine has an expected life of three years, a $69,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $540,000 per year, with costs of $190,000 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 $70,000 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 2
KADS, Incorporated has spent $340,000 on research to develop a new computer game. The firm is planning to spend $140,000 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 $44,000. The machine has an expected life of three years, a $69,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $540,000 per year, with costs of $190,000 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 $70,000 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 2
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 $340,000 on research to develop a new computer game. The firm is planning to spend $140,000 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 $44,000. The machine has an expected life of three years, a $69,000 estimated resale value, and falls under
the MACRS seven-year class life. Revenue from the new game is expected to be $540,000 per year, with costs of $190,000 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
$70,000 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
2
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