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Kinston Limited is considering investing in new equipment that will cost 126000 dollars and will last for three years. The equipment will be fully depreciated
Kinston Limited is considering investing in new equipment that will cost 126000 dollars and will last for three years. The equipment will be fully depreciated using the straight-line method. The equipment will generate revenues of 115000 dollarseach year and the cost of goods sold will be 50% of sales. At the end of year three, the equipment will be sold for 15000 dollars. The appropriate cost of capital is 10% and Kinston's tax rate is 35%.
What is the free cash flow in the final year (i.e., free cash flows in year three)?
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