ago, your purchase it for $170,000 today The CCA rate applicable to both machines is 30%; neither machine will have any long-term salvage value You expect that the new m earnings before interest, taxes, depreciation, and amortization (EBITDA) of $55,000 per year for the next 10 years. The current machine is expected to produce EBIT All other expenses of the two machines are identical. The market value today of the current machine is $50,000. Your company's tax rate is 35%, and the opportunity type of equipment is 10%. Should your company replace its year-old machine? What is the NPV of replacement? The NPV of replacement is 1 (Round to the nearest dollar)
ago, your purchase it for $170,000 today The CCA rate applicable to both machines is 30%; neither machine will have any long-term salvage value You expect that the new m earnings before interest, taxes, depreciation, and amortization (EBITDA) of $55,000 per year for the next 10 years. The current machine is expected to produce EBIT All other expenses of the two machines are identical. The market value today of the current machine is $50,000. Your company's tax rate is 35%, and the opportunity type of equipment is 10%. Should your company replace its year-old machine? What is the NPV of replacement? The NPV of replacement is 1 (Round to the nearest dollar)
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 11P
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Question
6
Transcribed Image Text:One year ago, your company purchased a machine used in manufacturing for $110,000. You have learned that a new machine is available that offers many advantages and that you can
purchase it for $170,000 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 $55,000 per year for the next 10 years. The current machine is expected to produce EBITDA of $21,000 per year.
All other expenses of the two machines are identical. The market value today of the current machine is $50,000. 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 $(Round to the nearest dollar)
CHE
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