Planning to buy new snow maker to replace existing machine

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Reference no: EM131939818

Let it snow is considering a new investment. Planning to buy a new snow maker to replace the existing machine that was bought 5 years ago. New machine will cost 25 million and has expected life of 10 years. annual depreciation rate for this machinery is 2.5 million. old machinery had an original cost of 15 million and was depreciated on a straight line basis. original expected life of the old equipment was 15 years. The new machine will result in annual cost savings of 7 million. Old machiney can now be sold at 5 million. Assume a 40% tax rate, WACC of 18.52% and cost of dect is 9%. would you replace the machinery?

Reference no: EM131939818

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