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

question 8

Multiple Choice

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 $500,000 per year, with costs of $200,000 per year. The firm has a tax rate of 21 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 1 operating cash flow for this project be?

• A) $195,000
• B) $167,135
• C) $246,003
• D) $300,000

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Definitions:

Computer-Mediated Meetings

Meetings conducted over digital platforms using computers and the internet to facilitate communication.

Web Portals

Websites that provide gateways or entry points to a wide range of resources and services on the internet, often catering to specific interests or needs.

Mixed Message

Communication that contains conflicting or unclear information, leading to misunderstanding or confusion in the recipient.

Physical Distraction

External stimuli or environmental factors that divert attention away from a task or focus, potentially reducing efficiency or productivity.