andalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $1,850,000 and will last for 7 years. Variable costs are 36 percent of sales, and fixed costs are $149,000 per year. Machine B costs $4,570,000 and will last for 9 years. Variable costs for this machine are 31 percent of sales and fixed costs are $89,000 per year. The sales for each machine will be $9.14 million per year. The required return is 10 percent and the tax rate is 21 percent. Both machines will be depreciated on a straight-line basis.

If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine A?

(a)-3,041,626.17 (b) 4,178,973.83 (c) -14,807,910.10 (d) -3,193,707.48 (e) -2,889,544.87

If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine B?

(a) -2,995,599.93 (b) -17,251,731.34 (c) 4,225,000.07 (d) -3,145,379.93 (e) -2,845,819.93