ANSWER IN BOLD 15

Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $1,860,000 and will last for 3 years. Variable costs are 38 percent of sales, and fixed costs are $176,000 per year. Machine B costs $4,790,000 and will last for 6 years. Variable costs for this machine are 31 percent of sales and fixed costs are $119,000 per year. The sales for each machine will be $9.58 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? EAC If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine B? EAC