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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 21% tax bracket.
-Assume that Kinston's new machine will be depreciated straight line to a salvage value of $5,000 at the end of year three.What is the NPV for this project?
Issuance Price
The price at which a company's securities are made available for sale when they are first offered to the public.
Carrying Amount
The book value of an asset as recorded in an entity's financial statements, calculated as the original cost minus accumulated depreciation or amortization.
Bonds Issued
A financial instrument representing a loan made by an investor to a borrower, typically corporate or governmental, where the issuer commits to paying back the principal along with interest at a specified future date.
Straight-Line Method
A depreciation method that allocates an equal amount of the cost of an asset to each year of its useful life.
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