QUESTION $3$:

Silvana Zhang of Sajjad Jafri & Geopeng Li Limited is considering purchasing a new widget

making machine. She would like to know the maximum price she should pay for the new

machine.

$1.$ The new machine will replace the existing machine, which has a current market value of

$$1,000,000.$

$2.$ The new machine will reduce before tax operating cost by $$300,000$ per year for $15$ years.

$3.$ The old machine is expected to last for another $10$ years and will have a salvage value of

$$100,000$ at the end of $10$ years.

$4.$ The new machine is expected to last for $15$ years and will have a salvage value of $$200,000.$

CCA rate is $20\%,$ tax rate is $30\%,$ and the required rate of return is $15\%$