One year? ago, your company purchased a machine used in manufacturing for $ 100,000. You have...

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One year? ago, your company purchased a machine used inmanufacturing for $ 100,000. You have learned that a new machine isavailable that offers many? advantages; you can purchase it for $170,000 today. It will be depreciated on a? straight-line basisover ten? years, after which it has no salvage value. You expectthat the new machine will contribute EBITDA? (earnings before?interest, taxes,? depreciation, and? amortization) of $ 35,000 peryear for the next ten years. The current machine is expected toproduce EBITDA of $ 21,000 per year. The current machine is beingdepreciated on a? straight-line basis over a useful life of 11?years, after which it will have no salvage? value, so depreciationexpense for the current machine is $ 9,091 per year. All otherexpenses of the two machines are identical. The market value todayof the current machine is $ 50,000. Your? company's tax rate is 38%?, and the opportunity cost of capital for this type of equipmentis 10 %. Is it profitable to replace the? year-old machine?

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AnswerNoIt is not profitable to replace the yearoldmachineThe NPV See Answer

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One year? ago, your company purchased a machine used inmanufacturing for $ 100,000. You have learned that a new machine isavailable that offers many? advantages; you can purchase it for $170,000 today. It will be depreciated on a? straight-line basisover ten? years, after which it has no salvage value. You expectthat the new machine will contribute EBITDA? (earnings before?interest, taxes,? depreciation, and? amortization) of $ 35,000 peryear for the next ten years. The current machine is expected toproduce EBITDA of $ 21,000 per year. The current machine is beingdepreciated on a? straight-line basis over a useful life of 11?years, after which it will have no salvage? value, so depreciationexpense for the current machine is $ 9,091 per year. All otherexpenses of the two machines are identical. The market value todayof the current machine is $ 50,000. Your? company's tax rate is 38%?, and the opportunity cost of capital for this type of equipmentis 10 %. Is it profitable to replace the? year-old machine?