Calculate the eac for each machine

Reference no: EM132075845

Question: Comparing Mutually Exclusive Projects

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 six years. Variable costs are 35 percent of sales, and fixed costs are $240,000 per year. Machine B costs $5,300,000 and will last for nine years. Variable costs for this machine are 30 percent of sales and fixed costs are $175,000 per year. The sales for each machine will be $11 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. (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 $

Which machine should you choose?

Machine A

Machine B

Reference no: EM132075845

Questions Cloud

What the difference between absorption and variable costing : Flygt Corporation sells one product, its waterproof hiking boot. What is the difference in net income between absorption and variable costing

Determine the total costs as an equivalent annual charge : A safety improvement project has a capital cost of $100,000 and annual maintenance costs of $20,000. The salvage value of the project at the end of 5 years.

Protecting your online presence : Discuss, with great detail, how important protecting your online presence (across all services you use) is growing in importance, both for you

What should the project manager do now : What should the project manager do now? Will this project ever end? Are the project team members being punished for their good work?

Calculate the eac for each machine : 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 six years.

What has to occur for inpatient revenue to increase : What has to occur for inpatient revenue to increase? How do readmission rates affect inpatient revenue?

Analysis to legal principles and cases : Advise Steve if he is liable for this $3500 bill or is there something Steve can argue to avoid this liability?

Calculate the payback period for this investment : Wrigley's Wrecker Service is considering the purchase of a specialized tow truck for its small fleet. Calculate the payback period for this investment

Should you renew your loan with sail new england : Sail New England told you that the under-absorbed overhead was from excessive actual overhead costs caused by a spy from their chief competitor.

User Account

All Pages