Business, 30.03.2020 16:54 34267

Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,100,000 and will last for 6 years. Variable costs are 35 percent of sales, and fixed costs are $204,000 per year. Machine B costs $6,100,000 and will last for 9 years. Variable costs for this machine are 30 percent of sales and fixed costs are $165,000 per year. The sales for each machine will be $8.86 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.)
(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.)

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Vandalay Industries is considering the purchase of a new machine for the production of latex. Machin...

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