Question
In: Finance
One year ago, your company purchased a machine used in manufacturing for $ 105,000 . You...
One year ago, your company purchased a machine used in manufacturing for $ 105,000 . You have learned that a new machine is available that offers many advantages; you can purchase it for $ 140,000 today. It will be depreciated on a straigt-line basis over ten years, after which it has no salvage value. You expect that the new machine will contribute EBITDA (earnings before interest, taxes, depreciation, and amortization) of $60,000 per year for the next ten years. The current machine is expected to produce EBITDA of $ 23,000 per year. The current machine is being depreciated on a straight-line basis over a useful life of 11 years, after which it will have no salvage value, so depreciation expense for the current 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 40% , and the opportunity cost of capital for this type of equipment is 12% . Is it profitable to replace the year-old machine? THE NPV OF THE REPLACEMENT IS: __________________
Solutions
jeff jeffy answered 8 months agoRelated Solutions
One year ago, your company purchased a machine used in manufacturing for$105,000.You have learned that a...
One year ago, your company purchased a machine used in
manufacturing for$105,000.You have learned that a new machine is
available that offers many advantages and you can purchase it
for$140,000today. It will be depreciated on a straight-line basis
over 10 years and has no salvage value. You expect that the new
machine will produce a gross margin (revenues minus operating
expenses other than depreciation) of$35,000per year for the next
10 years. The current machine is expected to produce a gross...
One year? ago, your company purchased a machine used in manufacturing for $105,000. You have learned...
One year? ago, your company purchased a machine used in
manufacturing for $105,000. You have learned that a new machine is
available that offers many advantages and that you can purchase it
for $160,000 today. The CCA rate applicable to both
machines is 20%?; 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 $50,000 per year for the next ten years. The
current machine...
One year ago, your company purchased a machine used in manufacturing for $105,000.You have learned that...
One year ago, your company purchased a machine used in
manufacturing for $105,000.You have learned that a new machine is
available that offers many advantages; you can purchase it for
$150,000 today. It will be depreciated on a straight-line basis
over ten years, after which it has no salvage value. You expect
that the new machine will contribute EBITDA (earnings before
interest, taxes, depreciation, and amortization) of $55,000 per
year for the next ten years. The current machine is expected...
One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for $105,000. You have learned that a new machine is
available that offers many advantages; you can purchase it for
$140,000 today. It will be depreciated on a straight-line basis
over ten years, after which it has no salvage value. You expect
that the new machine will contribute EBITDA (earnings before
interest, taxes, depreciation, and amortization) of $60,000 per
year for the next ten years. The current machine is...
One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for $105,000. You have learned that a new machine is
available that offers many advantages and you can purchase it for
$165,000 today. It will be depreciated on a straight-line basis
over 10 years and has no salvage value. You expect that the new
machine will produce a gross margin (revenues minus operating
expenses other than depreciation) of $45,000 per year for the next
10 years. The current machine...
One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for $105,000. You have learned that a new machine is
available that offers many advantages and you can purchase it for
$140,000 today. It will be depreciated on a straight-line basis
over 10 years and has no salvage value. You expect that the new
machine will produce a gross margin (revenues minus operating
expenses other than depreciation) of $35,000 per year for the next
10 years. The current machine...
One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for $105,000. You have learned that a new machine is
available that offers many advantages; you can purchase it for
$170,000 today. It will be depreciated on a straight-line basis
over ten years, after which it has no salvage value. You expect
that the new machine will contribute EBITDA (earnings before
interest, taxes, depreciation, and amortization) of $35,000 per
year for the next ten years. The current machine is...
One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for
$105,000.
You have learned that a new machine is available that offers
many advantages; you can purchase it for
$140,000
today. It will be depreciated on a straight-line basis over
ten years, after which it has no salvage value. You expect that
the 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...
One year ago, your company purchased a machine used in manufacturing for $ 105 comma 000$105,000....
One year ago, your company purchased a machine used in
manufacturing for
$ 105 comma 000$105,000.
You have learned that a new machine is available that offers
many advantages and you can purchase it for
$ 145 comma 000$145,000
today. It will be depreciated on a straight-line basis over 10
years and has no salvage value. You expect that the new machine
will produce a gross margin (revenues minus operating expenses
other than depreciation) of
$ 60 comma 000$60,000
per...
One year ago, your company purchased a machine used in manufacturing for $ 105 comma 000$105,000....
One year ago, your company purchased a machine used in
manufacturing for
$ 105 comma 000$105,000.
You have learned that a new machine is available that offers
many advantages and you can purchase it for
$ 140 comma 000$140,000
today. It will be depreciated on a straight-line basis over 10
years and has no salvage value. You expect that the new machine
will produce a gross margin (revenues minus operating expenses
other than depreciation) of
$ 35 comma 000$35,000
per...
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