Question
One year ago, your company purchased a machine used in manufacturing for . You have learned that a new machine is available that offers many
One year ago, your company purchased a machine used in manufacturing for . You have learned that a new machine is available that offers many advantages and that you can purchase it for today. The CCA rate applicable to both machines is ; 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 per year for the next 10 years. The current machine is expected to produce EBITDA of per year. All other expenses of the two machines are identical. The market value today of the current machine is . Your company's tax rate is , and the opportunity cost of capital for this type of equipment is . Should your company replace its year-old machine?
a. The NPV of replacement is ____ $ (round to nearest dollar)
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