One year ago, your company purchased a machine used in manufacturing for $ 95 000 ....

One year ago, your company purchased a machine used in manufacturing for $ 95 000 . You have learned that a new machine is available that offers many advantages; you can purchase it for $ 140000 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 $ 50 000 per year for the next ten years. The current machine is expected to produce EBITDA of $ 20 000 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 $ 8 comma 636 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 45 % , and the opportunity cost of capital for this type of equipment is 10 % . Is it profitable to replace the year-old machine?

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago

One year ago, your company purchased a machine used in manufacturing for $ 95 comma 000....

One year ago, your company purchased a machine used in manufacturing for $ 95 comma 000. You have learned that a new machine is available that offers many advantages and you can purchase it for $ 150 comma 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 comma 000 per...

One year ago, your company purchased a machine used in manufacturing for $ 90 comma 000....

One year ago, your company purchased a machine used in manufacturing for $ 90 comma 000. You have learned that a new machine is available that offers many advantages and that you can purchase it for $ 170 comma 000 today. The CCA rate applicable to both machines is 40 %; 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 $ 45 comma 000...

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

One year ago, your company purchased a machine used in manufacturing for $ 120 comma 000. You have learned that a new machine is available that offers many advantages and that you can purchase it for $ 160 comma 000 today. The CCA rate applicable to both machines is 40 %; 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 $ 40 comma 000...

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

One year? ago, your company purchased a machine used in manufacturing for $ 120, 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 $ 50, 000 per year for the next...

One year ago, your company purchased a machine used in manufacturing for $ 110 comma 000....

One year ago, your company purchased a machine used in manufacturing for $ 110 comma 000. You have learned that a new machine is available that offers many advantages and you can purchase it for $ 150 comma 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 $ 40 comma 000 per...

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

One year ago, your company purchased a machine used in manufacturing for $ 100 comma 000. You have learned that a new machine is available that offers many advantages and that you can purchase it for $ 150 comma 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 comma 000...

One year ago, your company purchased a machine used in manufacturing for $ 110 comma 000....

One year ago, your company purchased a machine used in manufacturing for $ 110 comma 000. You have learned that a new machine is available that offers many advantages and you can purchase it for $ 150 comma 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 $ 40 comma 000 per...

One year ago, your company purchased a machine used in manufacturing for $ 115 comma 000....

One year ago, your company purchased a machine used in manufacturing for $ 115 comma 000. You have learned that a new machine is available that offers many advantages and you can purchase it for $ 145 comma 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 $ 50 comma 000 per...

One year ago, your company purchased a machine used in manufacturing for $ 110 comma 000....

One year ago, your company purchased a machine used in manufacturing for $ 110 comma 000. You have learned that a new machine is available that offers many advantages and you can purchase it for $ 140 comma 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 $ 55 comma 000 per...

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

One year ago, your company purchased a machine used in manufacturing for $ 120, 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 $ 60,000 per year for the next...

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One year ago, your company purchased a machine used in manufacturing for $ 95 000 ....

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One year​ ago, your company purchased a machine used in manufacturing for $ 95 000 ....

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One year ago, your company purchased a machine used in manufacturing for $ 95 000 ....