Question
Jax Inc is considering the purchase of a new machine for the production of computers. Machine A costs $4,000,000 and will last for seven years.
Jax Inc is considering the purchase of a new machine for the production of computers. Machine A costs $4,000,000 and will last for seven years. Variable costs are 20% of sales, and fixed costs are $500,000 annually. Machine B costs $6,000,000 and will last for ten years. Variable costs for the machine are 10% of sales, and fixed costs are $750,000 annually. The sales for each machine will be $4,000,000 per year. The required rate of return is 9%, the tax rate is 21%, and both machines will be depreciated using straight-line depreciation with no salvage value.
Q 5 Calculate the net present value for Machine B. (Round to 2 decimals)
Q6 Calculate the equivalent annual annuity for Machine A. (Round to 2 decimals)
Q7 Calculate the equivalent annual annuity for Machine B. (Round to 2 decimals)
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