Question
Tuner Corp. is looking into the option of buying of a new machine for the production of rubber. Machine A costs $2.91 million and will
Tuner Corp. is looking into the option of buying of a new machine for the production of rubber. Machine A costs $2.91 million and will last for six years. Variable costs are 32% of sales, and fixed costs are $2,082,356 per year. Machine B costs $4.98 million and will last for nine years. Variable costs for this machine are 24% of sales and fixed costs are $1,329,650 per year. Combined sales for each will be $9.4 million per year. The required return is 7 %, and the tax rate is 38%. Both of the machines will be depreciated using the straight-line basis. The company wants to replace the machines when they wears out perpetually.
Calculate the EAC for machine A. (Round answer to 0 decimal places. Do not round intermediate calculations)
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