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What will be the cash flows for the project for kads inc

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KADS, Inc., has spent $330,000 on research to develop a new computer game. The firm is planning to spend $130,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $43,000.

  • The machine has an expected life of three years, a $68,000 estimated resale value, and falls under the MACRS 7-year class life.
  • Revenue from the new game is expected to be $530,000 per year, with costs of $180,000 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 $65,000 at the beginning of the project.

Problem 1: What will the cash flows for this project be?

Reference no: EM133007333

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