Finance 1 Problem

[ak1995]

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 that you can purchase it for $170,000 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 (EPITDA) of $35,000 per year for the next ten years. The current machine is expected to produce EPITDA of $20,000 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 38%, and the opportunity cost of capital for this type of equipment is 12%.

What is the NPV of replacement?
---> the correct answer is -$36,626

How do you get this answer? Thanks in advance for any help!

 

[stapel]

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 that you can purchase it for $170,000 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 (EPITDA) of $35,000 per year for the next ten years. The current machine is expected to produce EPITDA of $20,000 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 38%, and the opportunity cost of capital for this type of equipment is 12%.

What is the NPV of replacement?
---> the correct answer is -$36,626

How do you get this answer? Thanks in advance for any help!

What answer did you get? What were your steps?

Please reply showing all of your efforts so far, even if you think they're wrong, so the volunteers can see where things are going sideways. Thank you!