Purchase of new machine for production of latex

Assignment Help Financial Management

Reference no: EM132009094

Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $1,920,000 and will last for 4 years. Variable costs are 38 percent of sales, and fixed costs are $144,000 per year. Machine B costs $4,470,000 and will last for 6 years. Variable costs for this machine are 28 percent of sales and fixed costs are $121,000 per year. The sales for each machine will be $8.94 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.)

Reference no: EM132009094

Questions Cloud

What messages do you think the ads are sending : SCS 100 Your second longer-term assignment in this course is to complete an observation journal, where you will use the previous information collected.

Equity capital using arithmetic and geometric growth rates : If the stock currently sells for $75, what is your best estimate of the company’s cost of equity capital using arithmetic and geometric growth rates?

Are there examples in place today of manufacturers : Are there examples in place today of manufacturers and/or retailers who have taken steps to reduce their pollution impact

What are the specific benefits-costs of industrialization : What are the specific benefits and costs of industrialization to our economy and to society?

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

How would this change a college approach to education : How would this change a college approach to education? What effect would this have on the student and the school's learning environment?

How would you describe craig jelineks personality : How would you describe Craig Jelinek's personality? What terminal and instrumental values are likely to be especially important to him as a manager?

Distributions of rates of return for stocks of ibm and intel : The distributions of rates of return for stocks of IBM and INTEL are given below: what is the required rate of return on this portfolio?

Economic benefits of industrialization outweigh the economic : Do the economic benefits of industrialization outweigh the economic costs?

User Account

All Pages