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One year ago, your company purchased a machine used in manufacturing for $ 1 0 5 comma 0 0 0 $ 1 0 5 ,

One year ago, your company purchased a machine used in manufacturing for $ 105 comma 000$105,000. You have learned that a new machine is available that offers many advantages and that you can purchase it for $ 150 comma 000$150,000 today. The CCA rate applicable to both machines is 20%20%; 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 $ 60 comma 000$60,000 per year for the next 10 years. The current machine is expected to produce EBITDA of $ 21 comma 000$21,000 per year. All other expenses of the two machines are identical. The market value today of the current machine is $ 50 comma 000$50,000. Your company's tax rate is 45%45%, and the opportunity cost of capital for this type of equipment is 11%11%. Should your company replace its year-old machine?

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