KADS, Inc. has spent $400,000 on research to develop a new computer game. The firm is planning to spend $200,000 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 MACRSLinks to an external site. 7-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, KADS has 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.

Use the information in the pictures below to answer the following question: According to the Management Report, should KADS go forward with the project? Explain your answer in detail using the Capital Budgeting key topic and tools in Ch 13 and Ch 13 from the M: Finance textbook readings.

Explanation: Explanation