Should your company replace its year - old machine? What is the NPV of replacement? The NPV of replacement is $ here enter your response (Round to the nearest dollar.)

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter12: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...
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One year ago, your company purchased a machine used in manufacturing for $ 115 comma 000. You have learned that a new machine is available that offers many advantages and that you can purchase it for $ 160 comma 000 today. The CCA rate applicable to both machines is 30%; neither machine will have any long - term salvage value. You expect that the new machine will produce earnings before interest, taxes, depreciation, and amortization (EBITDA) of $ 35 comma 000 per year for the next ten years. The current machine is expected to produce EBITDA of $ 20 comma 000 per year. All other expenses of the two machines are identical. The market value today of the current machine is $ 50 comma 000. Your company's tax rate is 35%, and the opportunity cost of capital for this type of equipment is 10%. Should your company replace its year - old machine? What is the NPV of replacement? The NPV of replacement is $ here enter your response (Round to the nearest dollar.)

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