Purchase of new machine for production of latex

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Reference no: EM131981340

Renegade Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2.9 million and will last for six years. Variable costs are 31% of sales, and fixed costs are $1982603 per year. Machine B costs $5.02 million and will last for nine years. Variable costs for this machine are 21% of sales and fixed costs are $1419859 per year. The sales for each machine will be $9.1 million per year. The required return is 8 %, 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: EM131981340

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