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At the beginning of 2016 (one year ago), Caffe Vita Coff,000 nat new chased three small-batch coffee roasters for a total cost of son ($1,100,000

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At the beginning of 2016 (one year ago), Caffe Vita Coff,000 nat new chased three small-batch coffee roasters for a total cost of son ($1,100,000 each). Now, at the beginning of 2017 roasters that offer significant advantages are available. The purchased for $4,500,000 ($1,500,000 each), and have no salvag the new and the old roasters are expected to last until 2027.Mai ipates that the new roasters will produce total profit before depre of $1,200,000 a year, so that, using straight- line depreciationo year, the annual profit before tax will be $750,000. that new new roasters can be depreciation and taxes The one year old roasters are expect and taxes of $600,000 a year and, assuming a total economio years remaining) with straight-line deprediation of $300,000 per year, a fore tax of $300,000. The current market value of the old roasters is i.e. if the company buys the new roasters it will be able to sell the o $1,500,000. The company's tax rate is 40 percent, and its minimum acceptable rate of return is 10 percent. Ignoring possible taxes on sale of used equipment ed to produce a profit before depreciation life of 11 years (10 a profit be- $1,500,000, ld roasters for and assuming zero salvage values at the end of the roasters' economic lives, should Caffe Vita replace its year-old roasters? 0

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