Kinston Industries is considering investing in a machine that will cost $245.000 and will last for three years. Assume that Kinston's new machine will be depreciated straight line to a salvage value of $5.000 at the end of year three.

The machine will generate revenues of $180,000 each year and the cost goods sold will be 50% of sales. Fixed cost is $25000. At the end of year three the machine will be sold for $15.000. The appropriate cost of capital is 12% and Kinston is in the 32% tax bracket.

What is the NPV of this project.

 

Show excel NPV formula used 

Answer rating: 100% (QA)

To calculate the NPV of the project we need to estimate the cash flows for eac... View the full answer