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Ilana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $1.08 million. The lathe will cost $31,500 to run, will save the firm $123,300 in labour costs, and will be useful for 9 years. Suppose that for tax purposes, the lathe will be in an asset class with a CCA rate of 25%. Ilana has many other assets in this asset class. The lathe is expected to have a 9-year life with a salvage value of $101,000. The actual market value of the lathe at that time will also be $101,000. The discount rate is 5% and the corporate tax rate is 35%. What is the NPV of buying the new lathe? (Round your answer to the nearest cent.) NPV $

Ilana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $1.08 million. The lathe will cost $31,500 to run, will save the firm $123,300 in labour costs, and will be useful for 9 years. Suppose that for tax purposes, the lathe will be in an asset class with a CCA rate of 25%. Ilana has many other assets in this asset class. The lathe is expected to have a 9-year life with a salvage value of $101,000. The actual market value of the lathe at that time will also be $101,000. The discount rate is 5% and the corporate tax rate is 35%. What is the NPV of buying the new lathe? (Round your answer to the nearest cent.) NPV $

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Ilana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $1.08 million. The lathe will cost $31,500 to run, will save the firm $123,300 in labour costs, and will be useful for 9 years. Suppose that for tax purposes, the lathe will be in an asset class with a CCA rate of 25%. Ilana has many other assets in this asset class. The lathe is expected to have a 9-year life with a salvage value of $101,000. The actual market value of the lathe at that time will also be $101,000. The discount rate is 5% and the corporate tax rate is 35%. What is the NPV of buying the new lathe? (Round your answer to the nearest cent.) NPV $
Transcribed Image Text:Ilana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $1.08 million. The lathe will cost $31,500 to run, will save the firm $123,300 in labour costs, and will be useful for 9 years. Suppose that for tax purposes, the lathe will be in an asset class with a CCA rate of 25%. Ilana has many other assets in this asset class. The lathe is expected to have a 9-year life with a salvage value of $101,000. The actual market value of the lathe at that time will also be $101,000. The discount rate is 5% and the corporate tax rate is 35%. What is the NPV of buying the new lathe? (Round your answer to the nearest cent.) NPV $
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