Homework Answers
Initial outflow = 160,000 - 50,000 = $110,000
Tax savings on loss on sale
Book value = 105,000 × (1-0.4)= 63,000
Less sale price. = (50,000)
Loss = 13,000
Tax savings = 13,000× 45% = 5850
Additional post tax inflow
= (60,000 - 22,000) × (1 - 0.45)
= 38,000 × 0.55
= 20,900
PV of inflow
= 20,900 × PVAF (10%, 10yrs)
= 20,900 × 6.1446
= 128,421.
Tax savings due to additional depreciation
CCA rate = 40%
Book value of new machinery =160,000
Tax savings on depreciation 
PV of Tax savings on depre = 34,839
NPV
= - Initial outflow + Tax savings on loss on sale of old machinery + PV of inflow + PV of tax savings on depreciation
= - 110,000 + 5850 + 128,421 + 34,839
= $ 59,110
NPV of buying new machine = $ 59,110
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