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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 $1.9 million. The lathe will cost $30,000 per year to run, but it will save the firm $175,000 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 $450,000. The discount rate is 15%, and the corporate tax rate is 21%. What is the NPV of buying the new lathe?

Reference no: EM132460178

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