Purchase of new machine for the production of latex

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Reference no: EM131979246

Renegade Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3 million and will last for six years. Variable costs are 30% of sales, and fixed costs are $1905706 per year. Machine B costs $5 million and will last for nine years. Variable costs for this machine are 22% of sales and fixed costs are $1293448 per year. The sales for each machine will be $9.3 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 EAC for machine A. (Round answer to 2 decimal places. Do not round intermediate calculations)

Reference no: EM131979246

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