One year ago, your company purchased a machine used in manufacturing for $ 95,000. You have...
One year ago, your company purchased a machine used in manufacturing for $ 95,000. You have learned that a new machine is available that offers many advantages and you can purchase it for $ 150,000 today. It will be depreciated on a straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $ 55,000 per year for the next 10 years. The current machine is expected to produce a gross margin of $ 21,000 per year. The current machine is being depreciated on a straight-line basis over a useful life of 11 years, and has no salvage value, so depreciation expense for the current machine is $ 8,636 per year. The market value today of the current machine is $ 60,000. Your company's tax rate is 42 %, and the opportunity cost of capital for this type of equipment is 10 %. Should your company replace its year-old machine?
A.The NPV of replacing the year-old machine is $_____?
B.Should your company replace its year-old machine? (Select the best choice below.)
A.No, there is a loss from replacing the machine.
B.Yes, there is a profit from replacing the machine.
Homework Answers
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One year ago, your company purchased a machine used in
manufacturing for $ 95,000. You have...
One year ago, your company purchased a machine used in manufacturing for $95,000.vYou have learned that a new machine i...
One year ago, your company purchased a machine used in manufacturing for $95,000.vYou have learned that a new machine is available that offers many advantages and you can purchase it for $150,000 today. It will be depreciated on a straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $50,000 per year for the next 10 years. The current machine is...
One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned...
One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned that a new machine is available that offers many advantages; you can purchase it for $150,000 today. It will be depreciated on a straight-line basis over ten years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $45,000 per year for the next ten years. The current machine is...
One year ago, your company purchased a machine used in manufacturing for $100,000. You have learned...
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 you can purchase it for $160,000 today. It will be depreciated on a straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $45,000 per year for the next 10 years. The current machine...
One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned...
One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned that a new machine is available that offers many advantages and you can purchase it for $160,000 today. It will be depreciated on a straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $40,000 per year for the next 10 years. The current machine...
One year ago, your company purchased a machine used in manufacturing for $120,000.You have learned that...
One year ago, your company purchased a machine used in manufacturing for $120,000.You have learned that a new machine is available that offers many advantages and you can purchase it for$150,000 today. It will be depreciated on a straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $50,000 per year for the next 10 years. The current machine is expected...
One year ago, your company purchased a machine used in manufacturing for $110,000. You have learned...
One year ago, your company purchased a machine used in manufacturing for $110,000. You have learned that a new machine is available that offers many advantages and you can purchase it for $140,000 today. It will be depreciated on a straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $60,000 per year for the next 10 years. The current machine...
One year ago, your company purchased a machine used in manufacturing for $ 105 comma 000....
One year ago, your company purchased a machine used in manufacturing for $ 105 comma 000. You have learned that a new machine is available that offers many advantages and you can purchase it for $ 150 comma 000 today. It will be depreciated on a straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $ 45 comma 000 per...
One year ago, your company purchased a machine used in manufacturing for $ 105 000. You...
One year ago, your company purchased a machine used in manufacturing for $ 105 000. You have learned that a new machine is available that offers many advantages; you can purchase it for $ 155 000 today. It will be depreciated on a straight-line basis over ten years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $ 40 000 per year for the next...
One year ago, your company purchased a machine used in manufacturing for $ 105 000. You...
One year ago, your company purchased a machine used in manufacturing for $ 105 000. You have learned that a new machine is available that offers many advantages; you can purchase it for $ 155 000 today. It will be depreciated on a straight-line basis over ten years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $ 45 000 per year for the next...
One year ago, your company purchased a machine used in manufacturing for $120,000. You have learned...
One year ago, your company purchased a machine used in manufacturing for $120,000. You have learned that a new machine is available that offers many advantages; you can purchase it for $200,000 today. It will be depreciated on a straight-line basis over 5 years, after which it has no salvage value. You expect that the new machine will produce EBITDA (earnings before interest, taxes, depreciation, and amortization) of $100,000 per year for the next 5 years. The current machine is...
One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned that a new machine is available that offers many advantages; you can purchase it for $150,000 today. It will be depreciated on a straight-line basis over ten years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $45,000 per year for the next ten years. The current machine is...
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 you can purchase it for $160,000 today. It will be depreciated on a straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $45,000 per year for the next 10 years. The current machine...
One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned that a new machine is available that offers many advantages and you can purchase it for $160,000 today. It will be depreciated on a straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $40,000 per year for the next 10 years. The current machine...
One year ago, your company purchased a machine used in manufacturing for $120,000. You have learned that a new machine is available that offers many advantages; you can purchase it for $200,000 today. It will be depreciated on a straight-line basis over 5 years, after which it has no salvage value. You expect that the new machine will produce EBITDA (earnings before interest, taxes, depreciation, and amortization) of $100,000 per year for the next 5 years. The current machine is...
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