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q14 please answer ASAP One year ago, your company purchased a machine used in manufacturing for $110,000. You have learned that a new machine is
q14 please answer ASAP
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 and that you can purchase it for $160,000 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 $23,000 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 35%, and the opportunity cost of capital for this type of equipment is 12%. Should your company replace its year-old machine? What is the NPV of replacement? The NPV of replacement is $. (Round to the nearest dollar.) Should your company replace its year-old machine? O A. No, because the only time a machine should be replaced is when it stops working completely. OB. No, because there is a loss from replacing the machine. OC. Yes, because a new machine will always be an improvement for the company. O D. Yes, because there is a profit from replacing the machine. Time Remaining: 01:08:11 NextStep by Step Solution
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