Jax Inc is considering the purchase of a new machine for the production of computers. Machine A costs $6,000,000 and will last for seven years. Variable costs are 20% of sales, and fixed costs are $500,000 annually. Machine B costs $8,000,000 and will last for nine years. Variable costs for the machine are 15% of sales, and fixed costs are $750,000 annually. The sales for each machine will be $3,000,000 per year. The required rate of return is 7%, the tax rate is 21%, and both machines will be depreciated using straight-line depreciation with no salvage value.

1a. Calculate the net present value for Machine B. (Round to 2 decimals)

1b. Calculate the equivalent annual annuity for Machine A. (Round to 2 decimals)

1c. Calculate the equivalent annual annuity for Machine B. (Round to 2 decimals)

1d. Based on the information provided, the firm should:

		purchase machine A because it has a higher NPV
		purchase machine B because it has a higher equivalent annual annuity
		purchase machine A because it has a higher equivalent annual annuity
		purchase machine B because it has a higher NPV