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Problem 12-6 Spreadsheet Problem: Project Cash Flows (LG12-3) KADS, Incorporated has spent $430,000 on research to develop a new computer game. The firm is planning to spend $230,000 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 $53,000. The machine has an expected life of three years, a $78,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $630,000 per year, with costs of $280,000 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 $115,000 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 decimal places. Answer is complete but not entirely correct. FCF Year 0 1 2 $ (398,000.00) S 284,992.55 $ 291,054.41 3 470,285.57

Problem 12-6 Spreadsheet Problem: Project Cash Flows (LG12-3) KADS, Incorporated has spent $430,000 on research to develop a new computer game. The firm is planning to spend $230,000 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 $53,000. The machine has an expected life of three years, a $78,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $630,000 per year, with costs of $280,000 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 $115,000 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 decimal places. Answer is complete but not entirely correct. FCF Year 0 1 2 $ (398,000.00) S 284,992.55 $ 291,054.41 3 470,285.57

Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
9th Edition
ISBN:9781305635937
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter11: The Basics Of Capital Budgeting
Section: Chapter Questions
Problem 8P
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Problem 12-6 Spreadsheet Problem: Project Cash Flows (LG12-3) KADS, Incorporated has spent $430,000 on research to develop a new computer game. The firm is planning to spend $230,000 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 $53,000. The machine has an expected life of three years, a $78,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $630,000 per year, with costs of $280,000 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 $115,000 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 decimal places. Answer is complete but not entirely correct. FCF Year 0 1 2 $ (398,000.00) S 284,992.55 $ 291,054.41 3 470,285.57
Transcribed Image Text:Problem 12-6 Spreadsheet Problem: Project Cash Flows (LG12-3) KADS, Incorporated has spent $430,000 on research to develop a new computer game. The firm is planning to spend $230,000 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 $53,000. The machine has an expected life of three years, a $78,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $630,000 per year, with costs of $280,000 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 $115,000 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 decimal places. Answer is complete but not entirely correct. FCF Year 0 1 2 $ (398,000.00) S 284,992.55 $ 291,054.41 3 470,285.57
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