What will cash flows for this three-year project be

Assignment Help Financial Management
Reference no: EM131551217

Your company has spent $200,000 on research to develop a new computer game. The firm is planning to spend $300,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $25,000. The machine has an expected life of three years, a $50,000 estimated resale value, and falls under the MACRS seven-year class life. Revenue from the new game is expected to be $400,000 per year, with costs of $150,000 per year. The firm has a tax rate of 35 percent, an opportunity cost of capital of 10 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 three-year project be? What will be the payback period?

Reference no: EM131551217

Questions Cloud

The bond is trading at a discount-premium or par : Advise if the bond is trading at a discount, premium or par. Explain. Calculate the price of the bond.
How much will you pay in interest in your first payment : What will your quarterly payment be if you sign up for this mortgage? How much will you pay in interest in your first payment?
In an era of particularly low interest rates : In an era of particularly low interest rates, which of the following bonds is most likely to be called?
Equivalent and annual cost of the trade credit : What is the effective, or equivalent, annual cost of the trade credit?
What will cash flows for this three-year project be : Your company has spent $200,000 on research to develop new computer game. What will cash flows for this three-year project be? What will be the payback period?
What is the days sales outstanding : What is the days sales outstanding? What is the average amount of receivables?
Find the amount mary will receive : Ted owes $2000 to Mary. The loan is payable in 1 year at 10%. Find the amount Mary will receive
What is the effective annual rate : What rate should the shop report? What is the effective annual rate?
What is the minimum investment yield : What is the minimum investment yield the company requires to earn a 4% profit?

Reviews

Write a Review

Financial Management Questions & Answers

  Negotiate for the sale of eighty-four sets of tires

Truck Parts, Inc. (TPI), often sells supplies to United Fix-It Company (UFC), which services trucks. Over the phone, they negotiate for the sale of eighty-four sets of tires. TPI sends a letter to UFC detailing the terms and two weeks later ships the..

  Getting a student loan to help pay for your schooling

You are going to begin your freshmen year of college and you will be getting a student loan to help pay for your schooling.

  Plot the npvs as a function of the prevailing interest rate

For the following projects, plot the NPVs as a function of the prevailing interest rate and determine the appropriate IRRs.

  Company expects this equipment will lead to cash flows

Muncy, Inc., is looking to add a new machine at a cost of $4,133,250. The company expects this equipment will lead to cash flows of $814,322, $863,275, $937,250, $1,018,610, $1,212,960, and $1,225,000 over the next six years. If the appropriate disco..

  What is cost of common equity and wacc

Empire Electric Company (EEC) uses only debt and common equity. What is its cost of common equity? What is the WACC?

  What is the probability of observing average annual return

What is the probability of observing an average annual return over 6 years of -4 % or less?

  About the patterns of patron demand

The owner of a restaurant that serves continental-style entrees wants to learn more about the patterns of patron demand during the Friday-to-Sunday time period. She has decided to study the demand for dessert during this period. At the 0.05 level of ..

  Key corporate risks in today global environment facing

Describe and discuss the key corporate risks in today's global environment facing a newly developed technical firm.

  Debt–equity ratio for this company based on market values

Kiedis Corp. has interest bearing debt with a market value of $75.9 million. The company also has 1.6 million shares that sell for $26 per share. What is the debt–equity ratio for this company based on market values?

  Moves onto the property and begins to build new garage

Steve buys a house from Jim. There is no written contract. However, Steve pays the purchase price, moves onto the property, and begins to build a new garage. Jim seeks to evict Steve from the property stating that there was never a valid contract. Is..

  What is the price per share of the companys stock

Ward Corp. is expected to have an EBIT of $2,300,000 next year. What is the price per share of the company's stock?

  Net cash made as of maturity from arbitrage trading strategy

What is the current fair value of the call option? What is the value of delta at time 0? Write net cash made as of maturity from arbitrage trading strategy.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd