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Kinston Industries is considering investing in a machine that will cost $170,000 and will last...

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Finance

Kinston Industries is considering investing in a machine that will cost $170,000 and will last for three years. Assume that Kinstons 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 $130,000 each year and the cost of goods sold will be 50% of sales. Fixed cost is $18000. 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 32% tax bracket. What is the NPV of this project.

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