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What is the projects NPV

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Point 1: Western Manufacturing is considering replacing an old lathe with a new automated lathe. The new lathe costs $150,000, which includes installation. The old lathe can be sold for $27,000. Its book value is $20,000.

Point 2: The new lathe, because of greater capacity and being more energy efficient, will reduce costs for the company by $35,000 per year for 8 years. The new lathe will be depreciated using the straight-line method over 5 years at $30,000 per year.

Question 1: At the end of year 8, the new lathe will be scrapped for $15,000. If the company's tax rate is 35%, and the appropriate discount rate for this project is 12%, what is the project's NPV?

Reference no: EM132485260

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