lana Industries Incorporated needs a new lathe. It can buy a new high-speed lathe for $1.7 million. The lathe will cost $42,000 per year to run, but it will save the firm $164,000 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 $480,000. The discount rate is 12%, 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
lana Industries Incorporated needs a new lathe. It can buy a new high-speed lathe for $1.7 million. The lathe will cost $42,000 per year to run, but it will save the firm $164,000 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 $480,000. The discount rate is 12%, 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
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter11: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 8P: The Rodriguez Company is considering an average-risk investment in a mineral water spring project...
Related questions
Question
Apo
Don't upload any image please
![Ilana Industries Incorporated needs a new lathe. It can buy a new high-speed lathe for $1.7
million. The lathe will cost $42,000 per year to run, but it will save the firm $164,000 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
$480,000. The discount rate is 12%, 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%2F1c5da4f8-126f-4225-a7d4-f9529e0bb8f0%2F940b471d-404b-470a-af24-3d25ca0dd47b%2Fhwz4nne_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Ilana Industries Incorporated needs a new lathe. It can buy a new high-speed lathe for $1.7
million. The lathe will cost $42,000 per year to run, but it will save the firm $164,000 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
$480,000. The discount rate is 12%, 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
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Intermediate Financial Management (MindTap Course…](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Intermediate Financial Management (MindTap Course…](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
![Fundamentals Of Financial Management, Concise Edi…](https://www.bartleby.com/isbn_cover_images/9781337902571/9781337902571_smallCoverImage.jpg)
Fundamentals Of Financial Management, Concise Edi…
Finance
ISBN:
9781337902571
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning