Calculate the net present value for machine b

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Jax Inc is considering the purchase of a new machine for the production of computers. Machine A costs $5,000,000 and will last for 4 years. Variable costs are 20% of sales and fixed costs are $1,000,000 per year. Machine B costs $8,000,000 and will last for 7 years. Variable costs for the machine are 15% of sales and fixed costs are $1,250,000 per year. The sales for each machine will be $4,000,000 per year. The required rate of return is 7%, the tax rate is 21%, and both machines will be depreciated using straight-line with a no salvage value.

Problem 1: Calculate the net present value for Machine B. (Round to 2 decimals)

Problem 2: Calculate the equivalent annual annuity for Machine A.

Reference no: EM132996195

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