Solution-Should company replace its? year-old machine

Should company replace its? year-old machine

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Reference no: EM132765005

Question - One year ago, a company purchased a machine used in manufacturing for $100k. A new machine is avaliable and you can purchase it for $150k today. The CCA rate applicable to both machines is 20%? and 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 $45k per year for the next 10 years. The current machine is expected to produce EBITDA of $23k per year. All other expenses of the two machines are identical. The market value today of the current machine is $50k and company's tax rate is 45%?, and the opportunity cost of capital for this type of equipment is 12%. Should company replace its? year-old machine?

Reference no: EM132765005

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Should company replace its? year-old machine

Reference no: EM132765005

Reference no: EM132765005

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