Ilana Industries Inc. needs a new lathe. It can buy a new high-speed lathe for $1.4 million. The lathe will cost $49,000 per year to run, but it will save the firm $144,000 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 $450,000. The discount rate is 10%, and the corporate tax rate is 21%. What is the NPV of buying the new lathe? (A negative amount should be indicated by a minus sign. Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to 2 decimal places.)
NPV = -$ 507789.60
Year |
Cost of new machine |
Tax
shield- depreciation |
Sale of new machine |
(Savings-cost) after tax |
Net CF |
0 | -1400000 | 294000 | -1106000 | ||
1 | 75050 | 75050 | |||
2 | 75050 | 75050 | |||
3 | 75050 | 75050 | |||
4 | 75050 | 75050 | |||
5 | 75050 | 75050 | |||
6 | 75050 | 75050 | |||
7 | 75050 | 75050 | |||
8 | 75050 | 75050 | |||
9 | 75050 | 75050 | |||
10 | 355500 | 75050 | 430550 |
Ilana Industries Inc. needs a new lathe. It can buy a new high-speed lathe for $1.4...
Ilana Industries Inc. needs a new lathe. It can buy a new high-speed lathe for $1.5 million. The lathe will cost $50,000 per year to run, but it will save the firm $160,000 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 $400,000. The discount rate is 10%, and the corporate tax rate...
Ilana Industries Inc. needs a new lathe. It can buy a new high-speed lathe for $1.8 million. The lathe will cost $53,000 per year to run, but it will save the firm $183,000 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 $500,000. The discount rate is 12%, and the corporate tax rate...
Ilana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $0.94 million. The lathe will cost $30,700 to run, will save the firm $129,600 in labour costs, and will be useful for 10 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 10-year life with a salvage value...
Ilana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $0.94 million. The lathe will cost $30,700 to run, will save the firm $129,600 in labour costs, and will be useful for 10 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 10-year life with a salvage value...
Ilana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $1.09 million. The lathe will cost $38,600 to run, will save the firm $121,500 in labour costs, and will be useful for 8 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 8-year life with a salvage value...
Ilana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $1.01 million. The lathe will cost $36,500 to run, will save the firm $126,100 in labour costs, and will be useful for 8 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 8-year life with a salvage value...
llana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $1.09 million. The lathe will cost $32,100 to run, will save the firm $119,300 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...
ABC Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $0.95 million. The lathe will cost $33,100 to run, will save the firm $131,300 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%. ABC has many other assets in this asset class. The lathe is expected to have a 11-year life with a salvage value...
Maiden Industries, Inc., needs a new coffee. It can buy a new high-speed coffee for $0.96 million. The coffee will cost $34,500 to run, will save the firm $129,600 in labour costs, and will be useful for 12 years. Suppose that for tax purposes, the coffee will be in an asset class with a CCA rate of 25%. Maiden has many other assets in this asset class. The coffee is expected to have a 12-year life with a salvage value...
Maiden Industries, Inc., needs a new coffee. It can buy a new high-speed coffee for $0.96 million. The coffee will cost $34,500 to run, will save the firm $129,600 in labour costs, and will be useful for 12 years. Suppose that for tax purposes, the coffee will be in an asset class with a CCA rate of 25%. Maiden has many other assets in this asset class. The coffee is expected to have a 12-year life with a salvage value...