Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. one year? ago, your company purchased a machine us

One year? ago, your company purchased a machine used in manufacturing for $105,000. You have learned that a...

60.1K

Verified Solution

Question

Finance

One year? ago, your company purchased a machine used inmanufacturing for

$105,000.

You have learned that a new machine is available that offersmany? advantages; you can purchase it for

$140,000

today. It will be depreciated on a? straight-line basis overten? years, after which it has no salvage value. You expect thatthe new machine will contribute EBITDA? (earnings before? interest,taxes,? depreciation, and? amortization) of

$45,000

per year for the next ten years. The current machine is expectedto produce EBITDA of

$25,000

per year. The current machine is being depreciated on a?straight-line basis over a useful life of 11? years, after which itwill have no salvage? value, so depreciation expense for thecurrent machine is

$9,545

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

20 %,

and the opportunity cost of capital for this type of equipmentis

11 %

Is it profitable to replace the? year-old machine?

The NPV of the replacement is

Answer & Explanation Solved by verified expert
4.3 Ratings (671 Votes)
ParticularCostDepreciationEBITDATax benefit on Depreciation 20Total cash flow aCumulative PV for 10 Years 11    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Finance
1.2K views

Dyrdek Enterprises has equity with a market value of $11.1 million and the market value of...

Biology
1.2K views

Worksheet 2 Calculating Protons Electrons and Neutrons Element Symbol Al O F C Ne Be...

Geometry
1.2K views

10 I In circle A below which of the following is not true EF is...

Basic Math
1.2K views

"Maddox starts hiking from the main entrance to a trail. Penny starts her hike from...

Basic Math
1.2K views

Is pancakes and eggs or hot oatmeal with bacon a more filling breakfast for teenagers?Sixty...

Algebra
1.2K views

134080011 2Which number is equivalent toA 2B9CD817293121?

Algebra
1.2K views

Multiply 5 2 6 7 2 3 Sorry that s incorrect Try again

Accounting
1.2K views

During 2018, a company sells 270 units of inventory for $85 each. The company has...

Accounting
1.2K views

Question 17 4 pts Oler Company is considering selling their accounts receivable with a carrying...

Accounting
1.2K views

Jasper makes a $44.000, 90-day, 6.0% cash loan to Clayborn Co. The amount of interest...

Finance
1.2K views

One year ago, your company purchased a machine used in manufacturing for $120,000. You have...

Accounting
1.2K views

bonds are issued at par on May 1, 2021. interest was paid on October 31,...