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One year ago, your company purchased a machine used in manufacturing for $ 110,000. You have...
One year ago, your company purchased a machine used in manufacturing for $ 110,000. 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 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 $ 10,000 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 45 %, and the opportunity cost of capital for this type of equipment is 11 %. Is it profitable to replace the year-old machine
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jeff jeffy answered 1 year agoRelated Solutions
One year ago, your company purchased a machine used in manufacturing for $ 110,000. You have...
One year ago, your company purchased a machine used in
manufacturing for $ 110,000. 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 $ 45,000 per
year for the next ten years. The...
One year ago, your company purchased a machine used in manufacturing for $110,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for $110,000. You have learned that a new machine is
available that offers many advantages and you can purchase it for
$155,000 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
10 years. The current machine...
One year ago, your company purchased a machine used in manufacturing for $110,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for $110,000. You have learned that a new machine is
available that offers many advantages and you can purchase it for
$155,000 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 $60000 per year for the next
10 years. The current machine...
One year ago, your company purchased a machine used in manufacturing for $110,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for
$110,000.
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
$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 $110,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for $110,000. You have learned that a new machine is
available that offers many advantages and you can purchase it for
$160,000 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 $110,000 You have learned...
One year ago, your company purchased a machine used in
manufacturing for $110,000 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 $40,000 per
year for the next ten years. The current machine is...
One year ago, your company purchased a machine used in manufacturing for $110,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for $110,000. You have learned that a new machine is
available that offers manyadvantages; 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 $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 $110,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for $110,000. 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 $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 $110,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for $110,000. 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 astraight-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 $40,000 per
year for the next ten years. The current machine is expected...
One year ago, your company purchased a machine used in manufacturing for $ 110 comma 000$110,000....
One year ago, your company purchased a machine used in
manufacturing for
$ 110 comma 000$110,000.
You have learned that a new machine is available that offers
many advantages and you can purchase it for
$ 165 comma 000$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 comma 000$45,000
per...
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