One year ago, your company purchased a machine used in manufacturing for

$95,000.

You have learned that a new machine is available that offers many advantages and that you can purchase it for

$150,000

today. The CCA rate applicable to both machines is

40%;

neither machine will have any long-term salvage value. You expect that the new machine will produce earnings before interest, taxes, depreciation, and amortization (EBITDA) of

$55,000

per year for the next 10 years. The current machine is expected to produce EBITDA of

$22,000

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

38%,

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

11%.

Should your company replace its year-old machine?

What is the NPV of replacement?

The NPV of replacement is

$48,82148,821.

(Round to the nearest dollar.)

Should your company replace its year-old machine?

A.

No,

because there is a

loss

from replacing the machine.

B.

Yes,

because there is a

profit

from replacing the machine.

C.

Yes, because a new machine will always be an improvement for the company.

D.

No, because the only time a machine should be replaced is when it stops working completely.