KADS,Inc,Has Spent $400,000 on Research to Develop a New Computer

KADS,Inc.,has spent $400,000 on research to develop a new computer game.The firm is planning to spend $250,000 on a machine to produce the new game.Shipping and installation costs of the machine will be capitalized and depreciated; they total $50,000.The machine has an expected life of three years,a $75,000 estimated resale value,and falls under the MACRS seven-year class life.Revenue from the new game is expected to be $600,000 per year,with costs of $250,000 per year.The firm has a tax rate of 35 percent,an opportunity cost of capital of 15 percent,and it expects net working capital to increase by $100,000 at the beginning of the project.What will the year 0 free cash flow for this project be?

A) −$400,000
B) −$350,000
C) −$250,000
D) −$300,000

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