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One year ago, your company purchased a machine used in manutactuting for $90,000. You have ioarned that a new machine is available that oflers many advantages and that you can purchase it for $170,000 today. The CCA rate applicable to both machines is 40%; neither machine witl have any long-term salvage value. You expect thet the few machine will produce eamings before interest, taxes, depreciation, and amortization (EBITDA) of $55,000 per year for the next 10 years. The ourrent machine is expoctod 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.) Spherical Manufacturing recently spent $20 million to purchase some equipment used in the manufacture of disk ditwes. This equipment has a cCA rate of 25% and Sehericals maphal corporate tax rate is 30%. a. What are the annual CCA deductions associated with this equipment for the first five years? b. What are the annual CCA tax shieids for the first five years? c. What is the present value of the first five CCA tax shields if the appropriate discount rate is 8% per year? d. What is the present value of all the CCA tax shields assuming the equiment is never sold and the appropriste discount rato is 8% per year? e. How might your answer to part (d) change if Spherical anticipates that its marghal corporate tax raso will increase substantlally over the next five years? a. What are the annual CCA deductions assoeinted with this equipment for the fint fve years? The CCA deduction for year 1 is 5 (Round to the nearest dollar.)

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