Question $20(1$ point$)$

One year ago, your company purchased a machine used in manufacturing for $$100,000.$ You

have learned that a new machine is available that offers many advantages and that you can

purchase it for $$190,000$ today. The CCA rate applicable to both machines is $30\%$; 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 $$60,000$

per year for the next eight years. The current machine is expected to produce EBITDA of

$$30,000$ per year. All other expenses of the two machines are identical. The market value

today of the current machine is $$60,000.$ Your company's tax rate is $25\%,$ and the opportunity

cost of capital for this type of equipment is $10\%.$ Should your company replace its year$-$old

machine?

Yes, because the NPV of this investment is $$23,267$

No$,$ because the NPV of this investment is $-$$$9,964$

Yes, as the NPV of this investment is $$13,303$

Yes, because the NPV of this investment is $$10,554$

No$,$ because the NPV of this investment is $-$ $$32,546$