Purchase of new machine for the production of latex

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Reference no: EM13876001

Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,102,000 and will last for six years. Variable costs are 40 percent of sales, and fixed costs are $245,000 per year. Machine B costs $5,310,000 and will last for nine years. Variable costs for this machine are 35 percent and fixed costs are $180,000 per year. The sales for each machine will be $11.1 million per year. The required return is 11 percent and the tax rate is 30 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 NPV 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))

Calculate the EAC for each machine.

Reference no: EM13876001

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Purchase of new machine for the production of latex : Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,102,000 and will last for six years. Variable costs are 40 percent of sales, and fixed costs are $245,000 per year. Both machines will be..

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