Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2,170,000 and will last for 8 years. Variable costs are 40 percent of sales, and fixed costs are $165,000 per year. Machine B costs $4,370,000 and will last for 12 years. Variable costs for this machine are 32 percent of sales and fixed costs are $100,000 per year. The sales for each machine will be $8.74 million per year. The required return is 10 percent and the tax rate is 35 percent. Both machines will be depreciated on a straight-line basis.

Required: (a) If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine A? (Do not round your intermediate calculations.)

a.

$-4,677,448.12

$2,989,533.98

$-2,691,466.02

$-4,231,976.88

$-14,358,772.57

(b) If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine B? (Do not round your intermediate calculations.)

$-8,550,571.5

$-16,331,174.8

$3,284,182.65

$-7,736,231.36

$-2,396,817.35