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Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2,040,000 and will last for 5 years.
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2,040,000 and will last for 5 years. Variable costs are 40 percent of sales, and fixed costs are $151,000 per year. Machine B costs $4,210,000 and will last for 9 years. Variable costs for this machine are 32 percent of sales and fixed costs are $128,000 per year. The sales for each machine will be $8.42 million per year. The required return is 10 percent and the tax rate is 35 percent. Both machines l 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.) (Click to select) v (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.) (Click to select) v
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