Use the Information for the Question(s)below

question 34

Essay

Use the information for the question(s)below.
Kinston Industries is considering investing in a machine that will cost $125,000 and will last for three years.The machine will generate revenues of $120,000 each year and the cost of goods sold will be 50% of sales.At the end of year three the machine will be sold for $15,000.The appropriate cost of capital is 10% and Kinston is in the 35% tax bracket.
-Assume that Kinston's new machine will be depreciated using MACRS according to the following schedule:

What is the NPV of this project?

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Definitions:

Significance Level

The probability of rejecting the null hypothesis in a statistical test when it is actually true; a threshold for determining statistical significance, usually denoted by alpha (α).

Null Hypothesis

In statistics, a hypothesis that there is no significant difference or association between specified populations, any observed difference being due to sampling or experimental error.

Mean Weight

The average mass of an object or collection of objects, obtained by adding their weights together and dividing by the number of objects.

Two Tailed Test

A statistical test used to determine if there are differences in two directions, assessing the possibility of extreme outcomes in both tails of the distribution.