What is the EAC for machine A

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Question - Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2,080,000 and will last for 4 years. Variable costs are 36 percent of sales, and fixed costs are $139,000 per year, Machine B costs $4,800,000 and will last for 7 years. Variable costs for this machine are 30 percent of sales and fixed costs are $126,000 per year. The sales for each machine will be $9.6 million per year. The required return is 10 percent and the tax rate is 21 percent. Both machines will be depreciated on a straight-line basis.

If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine A?

If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine B?

Reference no: EM133119709

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