MBA615 - Please Help

= Homework: Unit 4 Homework Question 4, P8-14 (similar to) Part 1 of 2 HW Score: 30%, 6 of 20 points Points: 0 of 4 Save One year ago, your company purchased a machine used in manufacturing for $90,000. You have leamed that a new machine is available that offers many advantages, you can purchase it for S140,000 today. It will be depreciated on a straight-line basis over ten years, after which it has no salvage value. You expect that the new machine will contribute EBITDA (earnings before interest, taxes, depreciation, and amortization) of $60,000 per year for the next ten years. The Current machine is expected to produce EBITDA of S20,000 per year. The current machine is being depreciated on a straight-line basis over a useful life of 11 years, after which it will have no salvage value, so depreciation expense for the current machine is $8,182 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 20%, and the opportunity cost of capital for this type of equipment is 10%. Is it profitable to replace the year-old machine? The NPV of the replacement is $7. (Round to the nearest dollar.) Help me solve this View an example Get more help Clear all Check