Purchase of new machine for production of latex

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Reference no: EM131979138

Renegade Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2.89 million and will last for six years. Variable costs are 34% of sales, and fixed costs are $2084143 per year. Machine B costs $5.13 million and will last for nine years. Variable costs for this machine are 23% of sales and fixed costs are $1324234 per year. The sales for each machine will be $10.7 million per year. The required return is 9 %, and the tax rate is 38%. 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 NPV for machine A. (Round answer to 2 decimal places. Do not round intermediate calculations)

Reference no: EM131979138

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