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One year ago, your company purchased a machine used in manufacturing for $ 1 0 5 comma 0 0 0 . You have learned that

One year ago, your company purchased a machine used in manufacturing for $ 105 comma 000. You have learned that a new machine is available that offers many advantages and that you can purchase it for $ 150 comma 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 $ 40 comma 000 per year for the next 10 years. The current machine is expected to produce EBITDA of $ 20 comma 000 per year. All other expenses of the two machines are identical. The market value today of the current machine is $ 50 comma 000. Your company's tax rate is 40%, and the opportunity cost of capital for this type of equipment is 11%. Should your company replace its year-old machine?
One year ago, your company purchased a machine used in
manufacturing for $105,000. 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 $40,000 per year for the
next 10 years. The current machine is expected to produce EBITDA of
$20,000 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 40%, 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 $.(Round to the nearest dollar.)
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