One year ago, your company purchased a machine used in manufacturing for $90,000. You have learned that a newmachine is available that offers many advantages and you can purchase it for $145,000 today. It will be depreciated on astraight-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 machineis expected to produce a gross margin of $22,000 per year. The current machine is being depreciated on a straight-line basisover a useful life of 11 years, and has no salvage value, so depreciation expense for the current machine is $8,182 per year.The market value today of the current machine is $60,000. Your company's tax rate is 42%, and the opportunity cost ofcapital for this type of equipment is 10%. Should your company replace its year-old machine?CRITEThe NPV of replacing the year-old machine is 5 (Round to the nearest dollar.)Should your company replace its year-old machine? (Select the best choice below.)OA. Yes, there is a profit from replacing the machine.OB. No, there is a loss from replacing the machine.

The net present worth or net present worth applies to a progression of incomes happening at various…

at offers many advantages and you can purchase it for $145,000 today. It will be depreciated or 10 years and has no salvage value. You expect that the new machine will produce a gross mar ting expenses other than depreciation) of $45,000 per year for the next 10 years. The current m a gross margin of $22,000 per year. The current machine is being depreciated on a straight-line wears, and has no salvage value, so depreciation expense for the current machine is $8,182 per of the current machine is $60,000. Your company's tax rate is 42%, and the opportunity cost o quipment is 10%. Should your company replace its year-old machine? KITE he year-old machine is $(Round to the nearest dollar.)

at offers many advantages and you can purchase it for $145,000 today. It will be depreciated or 10 years and has no salvage value. You expect that the new machine will produce a gross mar ting expenses other than depreciation) of $45,000 per year for the next 10 years. The current m a gross margin of $22,000 per year. The current machine is being depreciated on a straight-line wears, and has no salvage value, so depreciation expense for the current machine is $8,182 per of the current machine is $60,000. Your company's tax rate is 42%, and the opportunity cost o quipment is 10%. Should your company replace its year-old machine? KITE he year-old machine is $(Round to the nearest dollar.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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