Ilana Industries Incorporated needs a new lathe. It can buy a new high-speed lathe for $1.1 million. The lathe will cost $46,000 per year to run, but it will save the firm $137,000 in labor costs and will be useful for 10 years. Suppose that, for tax purposes, the lathe is entitled to 100% bonus depreciation. At the end of the 10 years, the lathe can be sold for $190,000. The discount rate is 10%, and the corporate tax rate is 21%. What is the NPV of buying the new lathe? Note: A negative amount should be indicated by a minus sign. Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to 2 decimal places.
Ilana Industries Incorporated needs a new lathe. It can buy a new high-speed lathe for $1.1 million. The lathe will cost $46,000 per year to run, but it will save the firm $137,000 in labor costs and will be useful for 10 years. Suppose that, for tax purposes, the lathe is entitled to 100% bonus depreciation. At the end of the 10 years, the lathe can be sold for $190,000. The discount rate is 10%, and the corporate tax rate is 21%. What is the NPV of buying the new lathe? Note: A negative amount should be indicated by a minus sign. Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to 2 decimal places.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![Ilana Industries Incorporated needs a new lathe. It can buy a new high-speed lathe for $1.1 million. The lathe will cost $46,000 per year
to run, but it will save the firm $137,000 in labor costs and will be useful for 10 years. Suppose that, for tax purposes, the lathe is
entitled to 100% bonus depreciation. At the end of the 10 years, the lathe can be sold for $190,000. The discount rate is 10%, and the
corporate tax rate is 21%. What is the NPV of buying the new lathe?
Note: A negative amount should be indicated by a minus sign. Enter your answer in dollars not in millions. Do not round
intermediate calculations. Round your answer to 2 decimal places.
NPV](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe7a3a66d-c290-45fe-a7c9-2a55b25abb62%2F161cb134-f346-456c-8dd0-d71276fbd1fc%2Feijcpcu_processed.png&w=3840&q=75)
Transcribed Image Text:Ilana Industries Incorporated needs a new lathe. It can buy a new high-speed lathe for $1.1 million. The lathe will cost $46,000 per year
to run, but it will save the firm $137,000 in labor costs and will be useful for 10 years. Suppose that, for tax purposes, the lathe is
entitled to 100% bonus depreciation. At the end of the 10 years, the lathe can be sold for $190,000. The discount rate is 10%, and the
corporate tax rate is 21%. What is the NPV of buying the new lathe?
Note: A negative amount should be indicated by a minus sign. Enter your answer in dollars not in millions. Do not round
intermediate calculations. Round your answer to 2 decimal places.
NPV
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