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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 of $107,000. The actual market value of the lathe at that time will also be $107,000. The discount rate is 7% and the corporate tax rate is 35%. What is the NPV of buying the new lathe? (Round your answer to the nearest cent.) NPV $-369,050

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4 10 2 Cost 3 Savings 4 Running cost 5 Salvage value 6 tax 7 Cash flow 8 | PV@10% 9 NPV -1090000 119300 119300 119300 119300 119300 119300 119300 119300 119300 119300 119300 32100 -32100 32100 -32100 32100 -32100 32100 -32100 32100 -32100 32100 107000 64855 41011.25 23128.44 9716.328 -342.754 -7887.07 -13545.3-17789 -20971.7 -23358.8 -46486.4 -1090000 152055 128211.3 110328.4 96916.33 86857.25 79312.93 73654.7 69411.03 66228.27 63841.2 147713.6 -1090000 138231.8 105959.7 82891.39 66195.16 53931.52 44770.08 37796.51 32380.76 28087.25 24613.55 51772.72 -423370 2 4 10 12 Savings 13 Running cost 14 Depreciation 15 Salvage value 16 WDV 17 taxable income 18 tax 19 119300 119300 119300 119300 119300 119300 119300 119300 119300 119300 119300 32100 -32100 32100 -32100 32100 -32100 32100 -32100 32100 -32100 32100 272500-204375 -153281 -114961 -86220.7 -64665.5 -48499.1 -36374.4 -27280.8 -20460.6 -15345.4 107000 -46036.3 185300 -117175 -66081.3 -27760.9 979.2969 22534.47 38700.85 50825.64 59919.23 66739.42 132818.3 64855 -41011.3 -23128.4 -9716.33 342.7539 7887.065 13545.317788.97 20971.73 23358.8 46486.39

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