One year ago, your company purchased a machine used in manufacturing for $120,000. You have learned that a newmachine is available that offers many advantages and that you can purchase it for $160,000 today. The CCA rateapplicable to both machines is 40%; neither machine will have any long-term salvage value. You expect that the newmachine will produce earnings before interest, taxes, depreciation, and amortization (EBITDA) of $60,000 per year forthe next ten years. The current machine is expected to produce EBITDA of $23,000 per year. All other expenses of thetwo 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 10%. Should your company replace its year-oldmachine?What is the NPV of replacement?The NPV of replacement is $ ☐ (Round to the nearest dollar.)

Name: One year ago, your company purchased a machine used in manufacturing
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Description: One year ago, your company purchased a machine used in manufacturing for $120,000. You have learned that a newmachine is available that offers many advantages and that you can purchase it for $160,000 today. The CCA rateapplicable to both machines i

The net present value method can be used to determine if an investment is profitable or not. It…

Answered: What is the NPV of replacement? The NPV…

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Finance

What is the NPV of replacement? The NPV of replacement is $ (Round to the nearest dollar.)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 17P: The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will...

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