Use the Information for the Question(s) Below

question 39

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:

Risk Management

The identification of all exposure to financial loss of a business and includes the selection of techniques to manage those exposures; The Joint Commission defines risk management in health care as “clinical and administrative activities undertaken to identify, evaluate, and reduce the risk of injury to patients, staff, and visitors and the risk of loss to the organization itself.”

Financial Loss

Occurs when the value of an asset decreases or expenses surpass income, leading to a negative financial outcome.

Exposures

Contact with potentially harmful physical, chemical, or biological agents, either inadvertently or in a controlled manner for scientific study.

Malpractice

A failure by a professional to provide services with the competently expected level of skill or care, resulting in harm or injury to a person.