Question
one year ago, your company purchased a machine used in manufacturing for $110,000. you have learned that a new machine is available that offers many
one year ago, your company purchased a machine used in manufacturing for $110,000. you have learned that a new machine is available that offers many advantages; you can purchase it for $150,000 today. it will be depreciated on a straight-line basis over ten years, after which it has no salvage value. you expect that the new machine will contribute EBITDA of $40,000 per year for the next ten years. The current machine is expected to produce EBITDA of $22,000 per year. the current machine is being depreciated on a straight-line basis over a useful life of 11 years, after which it will have no salvage value, so depreciation expense for the current machine is $10,000 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 20%, and the opportunity cost of capital for this type of equipment is 12%. Is it profitable to replace the year-old machine? The NPV of the replacement is $___. Round to the nearest dollar
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