Kads inc has spent 500000 on research to develop a new


KADS, Inc. has spent $500,000 on research to develop a new computer game. The firm is planning to spend $250,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $55,000. The machine has an expected life of three years, an estimated $80,000 resale value, and falls under the MACRS 7-year class life. Revenue from the new game is expected to be $650,000 per year, with fixed costs of $300,000 per year. The firm has a tax rate of 30 percent, an opportunity cost of capital of 17 percent, and it expects net working capital to increase by $150,000 at the beginning of the project. What will the cash flows for this project be?

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Financial Management: Kads inc has spent 500000 on research to develop a new
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