Exercise 2-7 Profit comparison method

- Replacement decision The Copy Inc. produces copy machines, which are sold at a unit price of € 6,000. The company has the opportunity to buy a new production line. For investment decisions the company implements a 13 % discount rate. The situation can be characterised by the following data:

Old production line New production line Initial outlay € 25,000,000 € 30,000,000 Maintenance per period € 5,000,000 € 500,000 Economic life 10 years 10 years Variable Costs per unit produced € 4,000 € 3,900 Capacity per line 10,000 units 11,000 units The company's marketing department estimates that the maximum capacity viable in each case could be marketable.

Is the replacement desirable according to the decision rule of the profit comparison method?