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One year ago, your company purchased a machine used in manufacturing for $90,000. You have learned that a new machine is available that offers many advantages; you can purchase it for $160,000 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 $55,000 per year for the next ten years. The current machine is expected to produce EBITDA of $23,000 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 companys tax rate is 40%, and the opportunity cost of capital for this type of equipment is 11%, is it profitable to replace the year-old machine? The NPV of the replacement is S. (Round to the nearest dollar.) Enter your answer in the answer box and then click Check Answer part remaining Clear All Check Answer

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Home nert Page Layout Formulas Data Review View dd-Ins Cut E AutoSum ー E ゴWrap Text ta copy. в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 Conditional Format eCell Insert Delete Format Sort &Find & Format Painter Formatting as Table Styles2 Clear Clipboard CL331 CE Alignment Number Edting CG CH CI CJ CK CM CN CO CP YEAR INITIAL INVESTMENT INCREMENTAL MARGIN NEW DEPRECIATION (160000/10) OLD DEPRECIATION EBT TAX NET INCOME NEW DEPRECIATION OLD DEPRECIATION OPERATING CFAT SALVAGE VALUE TAX SAVING ON LOSS ON SALE TOTAL NET CASH FLOW PVI FA @ 11% PV OF CFAT 1 TO 10 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 328 329 330 331 11 r MIRR NPV İRR , REPLACEMENT S HPR GMAM LEAC MACRS 0 160000 32000 (55000-23000) LESS ADD 16000 8182 24182 9672.8 14509.2 16000 8182 22327.2 LESS ADD LESS ADD ADD 50000 12727.2 97272.8 22327.2 5.8892 131490.06 97272.8 34217.26 NPV 34217 AS NPV IS POSITIVE, MACHINE SHOULD BE REPLACED RATIOCASHBUDGET Wacc BOND EPS EBIT REPLACEMENT STats NPV BETA LEVERED 福 130% 01-02-2019Home nert Page Layout Formulas Data Review View dd-Ins s Cut aCopy E AutoSum ー E ゴWrap Text в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 C Paste Conditional Format CeInsert Delete Format Formatting as Table Styles2 Clear Sort &Find & Format Painter Clipboard Font Alignment Number Styles Cells Edting CE CF CG CH CI CJ CK CL CM CN CO CP 334 335 336 337 338 339 340 341 342 343 344 345 346 347 348 349 350 351 11 r MIRR NPV İRR , REPLACEMENT S /HPR GMAM LEAC MACRS NOTE 81818 BOOK VALUE OF OLD MACHINE (90000- 8182) SALVAGE VALUE LOSS ON SALE TAX SAVING ON LOSS ON SALE 50000 31818 12727.2 (40%*31818) RATIOCASHBUDGET / wacc, BOND /EPS EBIT | REPLACEMENT, STats .-NPV, BETA LEVERED ,勺 福 130% 02:02 01-02-2019

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