llana Industries, Inc, needs a new lathe. It can buy a new high-speed lathe for $1.03 million. The lathe will cost $39,000 to run, will save the firm $118.900 in labour costs, and will be useful for 10 years. Suppose that for tax purposes, the lathe will be in an asset class with a CCA rate of 25% lana has many other assets in this asset class. The lathe is expected to have a 10-year life with a salvage value of $98,000. The actual market value of the lathe at that time will also be $98,000. The discount rate is 15% and the corporate tax rate is 35% What is the NPV of buying the new lathe? (Round your answer to the nearest cent.)
llana Industries, Inc, needs a new lathe. It can buy a new high-speed lathe for $1.03 million. The lathe will cost $39,000 to run, will save the firm $118.900 in labour costs, and will be useful for 10 years. Suppose that for tax purposes, the lathe will be in an asset class with a CCA rate of 25% lana has many other assets in this asset class. The lathe is expected to have a 10-year life with a salvage value of $98,000. The actual market value of the lathe at that time will also be $98,000. The discount rate is 15% and the corporate tax rate is 35% What is the NPV of buying the new lathe? (Round your answer to the nearest cent.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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