Ilana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $1 million. The lathe will cost $35,000 to run, will save the firm $125,000 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 of $100,000. The actual market value of the lathe at that time will also be $ 100,000. The is 10% and the corporate tax rate is 35%. What is the NPV of buying the new lathe?
