Question
One year ago, your company purchased a 3D printer for $110,000. You have learned that a new, much better machine is available for $150,000. In
One year ago, your company purchased a 3D printer for $110,000. You have learned that a new, much better machine is available for $150,000. In will be depreciated on a straight-line basis and has no salvage value. You expect this new printer to produce $60,000 per year in revenue and cost $20,000 per year to operate for the next ten years. The current printer is expected to produce $40,000 per year in revenue and also costs $20,000 per year to operate. The current machines depreciation expense is $10,000 per year for the next 10 years, after which it will be discarded. It will have no salvage value. The market value of the current machine today is $50,000. Your companys tax rate is 21% and the opportunity cost of capital is 10%. Should your company replace its year-old printer?
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