Your company has spent $350,000 on research to develop a new computer game. The

Question

Your company has spent $350,000 on research to develop a new computer game. The firm is planning to spend $55,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $6,500. The machine has an expected life of 10 years, a $40,000 estimated resale value, and falls under the MACRS 15-Year class life. Revenue from the new game is expected to be $450,000 per year, with costs of $250,000 per year. The firm has a tax rate of 35 percent, an opportunity cost of capital of 12 percent, and it expects net working capital to increase by $65,000 at the beginning of the project. What will be the net cash flow for year one of this project?

Explanation / Answer

Solution:

Cost of Producing Game 55000 Shipping & Installation Cost 6500 Total Cost 61500 Depreciation Rate for Year 1 5% Depreciation Amount 3075

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.