Calculate the eac for each machine

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Reference no: EM132017384

Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,054,000 and will last for six years. Variable costs are 35 percent of sales, and fixed costs are $200,000 per year. Machine B costs $5,238,000 and will last for nine years. Variable costs for this machine are 30 percent of sales and fixed costs are $135,000 per year. The sales for each machine will be $10.2 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. The company plans to replace the machine when it wears out on a perpetual basis.

Calculate the EAC for each machine. (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567. Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

EAC

Machine A $

Machine B $

Originally I got $3,656,429.06 (Machine A) and $3,847,420.86 (Machine B) but they are incorrect.

Reference no: EM132017384

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