Vandelay Industries is considering the purchase of a new machine for producing

latex. Machine A costs $2,600,000 and will last for six years. Variable costs are

35% of sales and fixed costs are $195,000 per year. Machine B costs $5,200,000

and will last for 9 years. Variable costs for this machine are 30% of sales and

fixed costs are $230,000 per year. The sales for each machine will be $10 mil

per ear. The required return is 10% and the tax rate = 35%. 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, which machine should it

choose?