Purchase of new machine for the production of latex

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Reference no: EM131628964

Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,120,000 and will last for six years. Variable costs are 40 percent of sales, and fixed costs are $260,000 per year. Machine B costs $5,337,000 and will last for nine years. Variable costs for this machine are 35 percent of sales and fixed costs are $195,000 per year. The sales for each machine will be $11.4 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. (PVIFA 11%,6 = 4.23053785) do not round this number.

Calculate the EAC for each machine. (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567. 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.)

Reference no: EM131628964

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