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Saved Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2,260,000 and will last for 8
Saved Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2,260,000 and will last for 8 years. Variable costs are 35 percent of sales, and fixed costs are $134,000 per year. Machine B costs $4,270,000 and will last for 10 years. Variable costs for this machine are 27 percent of sales and fixed costs are $72,000 per year. The sales for each machine will be $8.54 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? If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine B? 4 of 14 o search
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