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Develop a new computer game

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KADS, Inc. has spent $390,000 on research to develop a new computer game. The firm is planning to spend $190,000 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 $49,000. The machine has an expected life of three years and a $74,000 estimated resale value. Revenue from the new game is expected to be $590,000 per year, with fixed costs of $240,000 per year. The firm has a tax rate of 21 percent, an opportunity cost of capital of 13 percent, and it expects net working capital to increase by $95,000 at the beginning of the project.

What will the cash flows for this project be?

Reference no: EM132473725

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