Shipping-installation costs of machine will be capitalized

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Reference no: EM131176453

KADS, Inc., has spent $350,000 on research to develop a new computer game. The firm is planning to spend $150,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $45,000. The machine has an expected life of three years, a $70,000 estimated resale value, and falls under the MACRS 7-year class life. Revenue from the new game is expected to be $550,000 per year, with costs of $200,000 per year. The firm has a tax rate of 40 percent, an opportunity cost of capital of 12 percent, and it expects net working capital to increase by $75,000 at the beginning of the project. What will the cash flows for this project be?

Reference no: EM131176453

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