Problemyour company has spent 270000 on research to develop, Ask an Expert

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Problem:

Your company has spent $270,000 on research to develop a new computer game. The firm is planning to spend $47,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $5,700. The machine has an expected life of 10 years, a $32,000 estimated resale value, and falls under the MACRS 15-Year class life. Revenue from the new game is expected to be $370,000 per year, with costs of $170,000 per year. The firm has a tax rate of 30 percent, an opportunity cost of capital of 12 percent, and it expects net working capital to increase by $57,000 at the beginning of the project.

Required:

Question: What will be the net cash flow for year one of this project?

Note: Please explain comprehensively and give step by step solution.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91169754

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