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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 $1.0 million. The lathe will cost $45,000 per year to run, but it will save the firm $135,000 in labor costs and will be useful for 10 years. Suppose that for tax purposes, the lathe will be depreciated on a straight-line basis over its 10-year life to a salvage value of $100,000. The actual market value of the lathe at that time also will be $100,000. The discount rate is 9%, and the corporate tax rate is 35%. What is the NPV of buying the new lathe?

Reference no: EM132063012

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