Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Ilana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $0.94 million. The lathe will cost $39,800 to run, will

Ilana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $0.94 million. The lathe will cost $39,800 to run, will save the firm $132,400 in labour costs, and will be useful for 11 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 11-year life with a salvage value of $99,000. The actual market value of the lathe at that time will also be $99,000. The discount rate is 12% and the corporate tax rate is 35%.
What is the NPV of buying the new lathe? (Round your answer to the nearest cent.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Risk Management And Financial Institutions

Authors: John C Hull

6th Edition

1119932483, 9781119932482

More Books

Students also viewed these Finance questions

Question

6. Identify seven types of hidden histories.

Answered: 1 week ago

Question

What is the relationship between humans and nature?

Answered: 1 week ago