What is the NPV for this project?
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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 35% tax bracket.
A) 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 after-tax salvage value of this project?
(enter only numbers, a negative sign if needed, and a period)
B) 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?
(enter only numbers, a negative sign if needed, and a period)
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The expert determines what is the NPV for a project.
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