Your company has spent $370,000 on research to develop a new compucer eToking ca

Question

Your company has spent $370,000 on research to develop a new compucer eToking capt wil be they total The firm is planning to spend $57,000 on a machine to produce the new game. new game is expected to be $470,000 per year with costs of $270,000 per year. The firm has a tax rate of 40 percent, an opportunity cost of capital of 15 percent, and it expects net working capital to increase by $67,000 at the beginning of the project. What will be the net cash ow for year one of this project? value, and falls under the MACRS 7-Year cless life. Revenue fron O $67.341 O $120000 O $123641 O $3641 MacBook Air 7 5 6 8 9

Explanation / Answer

Sales $   470,000 Less: Costs $   270,000 Depreciation $       9,103 (57000+6700)*0.1429 EBIT $   190,897 Less: Tax payable @ 40% $     76,359 Net income $   114,538 Add: Depreciation $       9,103 Operating cash flow Year 1 $   123,641

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