KADS, Inc., has spent $400,000 on research to develop a new computer game. The firm is...

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KADS, Inc., has spent $400,000 on research to develop a newcomputer game. The firm is planning to spend $200,000 on a machineto produce the new game. Shipping and installation costs of themachine will be capitalized and depreciated; they total $50,000.The machine has an expected life of three years, a $75,000estimated resale value, and falls under the MACRS 7-year classlife. Revenue from the new game is expected to be $600,000 peryear, with costs of $250,000 per year. The firm has a tax rate of21percent, an opportunity cost of capital of 15 percent, and itexpects net working capital to increase by $100,000 at thebeginning of the project. what will the cash flows for thisprojects be?

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The Net cash flows are as belowYearInitial cash flowOCFWorking capitalSalvageNet cash See Answer

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KADS, Inc., has spent $400,000 on research to develop a newcomputer game. The firm is planning to spend $200,000 on a machineto produce the new game. Shipping and installation costs of themachine will be capitalized and depreciated; they total $50,000.The machine has an expected life of three years, a $75,000estimated resale value, and falls under the MACRS 7-year classlife. Revenue from the new game is expected to be $600,000 peryear, with costs of $250,000 per year. The firm has a tax rate of21percent, an opportunity cost of capital of 15 percent, and itexpects net working capital to increase by $100,000 at thebeginning of the project. what will the cash flows for thisprojects be?