Use the Information for the Question(s) Below

question 17

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:

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