Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help! All other answers for this question on here have been incorrect! Vandalay Industries is considering the purchase of a new machine for the

Please help! All other answers for this question on here have been incorrect!

Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,048,000 and will last for six years. Variable costs are 40 percent of sales, and fixed costs are $195,000 per year. Machine B costs $5,229,000 and will last for nine years. Variable costs for this machine are 35 percent of sales and fixed costs are $130,000 per year. The sales for each machine will be $10.1 million per year. The required return is 11 percent, and the tax rate is 30 percent. Both machines will be depreciated on a straight-line basis. The company plans to replace the machine when it wears out on a perpetual basis. Calculate the NPV for each machine. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

NPV
Machine A $
Machine B $

Calculate the EAC for each machine. (Your answers should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

EAC
Machine A $
Machine B $

Which machine should the company choose?

Machine A

Machine B

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Value Investor's Handbook

Authors: Andrew P.C.

1st Edition

1098810449, 978-1098810443

More Books

Students also viewed these Finance questions