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 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

20%,

and the opportunity cost of capital for this type of equipment is

10%.

Is it profitable to replace the year-old machine?