Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2,070,000 and will last for 8 years.
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2,070,000 and will last for 8 years. Variable costs are 36 percent of sales, and fixed costs are $138,000 per year. Machine B costs $4,450,000 and will last for 12 years. Variable costs for this machine are 28 percent of sales and fixed costs are $116,000 per year. The sales for each machine will be $8.9 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.) (Click to select) $3,315,253.38 $-3,944,150.62 $-4,359,324.38 $-13,175,915.93 $-2,469,746.62 (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 $-7,424,133.94 $3,566,494.91 $-15,116,209.96 $-8,205,621.72 $-2,218,505.09
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started