What is the npv of buying the new lathe

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Ilana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $1 million. The lathe will cost $36,000 to run, will save the firm $123,000 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 $115,000. The actual market value of the lathe at that time will also be $115,000. The discount rate is 5% and the corporate tax rate is 35%.

1. What is the NPV of buying the new lathe?

Reference no: EM131442371

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What is the npv of buying the new lathe : Ilana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $1 million. The lathe will cost $36,000 to run, will save the firm $123,000 in labour costs, and will be useful for 11 years. What is the NPV of buying the new lathe?

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