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Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,290,000 and will last for six
Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,290,000 and will last for six years. Variable costs are 39 percent of sales, and fixed costs are $430,000 per year. Machine B costs $5,559,000 and will last for nine years. Variable costs for this machine are 34 percent of sales and fixed costs are $280,000 per year. The sales for each machine will be $13.2 million per year. The required return is 11 percent, and the tax rate is 22 percent. Both machines will be depreciated on a straight-line basis. The company plans to replace the machine when it wears out on a perpetual basis. Calculate the EAC for each machine. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) Answer is complete but not entirely correct. System A System B $ 5,083,947.72 $ 2,800,209.40
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