Your Company Has Spent $200,000 on Research to Develop a New

Your company has spent $200,000 on research to develop a new computer game.The firm is planning to spend $40,000 on a machine to produce the new game.Shipping and installation costs of the machine will be capitalized and depreciated; they total $5,000.The machine has an expected life of five years,a $25,000 estimated resale value,and falls under the MACRS five-year class life.Revenue from the new game is expected to be $300,000 per year,with costs of $100,000 per year.The firm has a tax rate of 35 percent,an opportunity cost of capital of 14 percent,and it expects net working capital to increase by $50,000 at the beginning of the project.What will be the operating cash flow for year one of this project?

A) −$49,150
B) $3,150
C) $123,400
D) $133,150

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free