One year ago, your company purchased a machine used in manufacturing for $120,000. You have learned that a new machine is available that offers many advantages; you can purchase it for $200,000 today.

It will be depreciated on a straight-line basis over 5 years, after which it has no salvage value. You expect that the new machine will produce EBITDA (earnings before interest, taxes, depreciation, and amortization) of $100,000 per year for the next 5 years.

The current machine is expected to produce EBITDA of $45,000 per year.

The current machine is being depreciated on a straight-line basis over a useful life of 6 years, after which it will have no salvage value, so depreciation expense for the current machine is $20,000 per year. All other expenses of the two machines are identical.

The market value today of the current machine is $80,000. Your companys tax rate is 45%, and the opportunity cost of capital for this type of equipment is 12%.

Is it profitable to replace the year-old machine?