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In: Finance
Problem 6: ANALYZING A PROJECT REPLACEMENT DECISION FOR VANDELAY INDUSTRIES Vandelay Industries is considering the purchase...
Problem 6: ANALYZING A PROJECT REPLACEMENT DECISION FOR VANDELAY INDUSTRIES
Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2,100,000 and will last for six years. Variable costs are 35% of sales, and fixed costs are $150,000 per year. Machine B costs $4,500,000 and will last for nine years. Variable costs for this machine are 30% of sales and fixed costs are $100,000 per year. The sales for each machine will be $9,000,000 per year. The appropriate discount rate is 10% and the tax rate is 35%. Both machines will be depreciated to zero on a straight-line basis. If the company plans to replace the machine when it wears out on a perpetual basis, which machine should you choose? Explain your answer and show all your calculations.
Solutions
jeff jeffy answered 9 months agoRelated Solutions
Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandelay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $3,072,000 and will
last for six years. Variable costs are 35 percent of sales, and
fixed costs are $215,000 per year. Machine B costs $5,265,000 and
will last for nine years. Variable costs for this machine are 30
percent of sales and fixed costs are $150,000 per year. The sales
for each machine will be $10.5 million per year. The required
return...
Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandelay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $3,096,000 and will
last for six years. Variable costs are 30 percent of sales, and
fixed costs are $235,000 per year. Machine B costs $5,301,000 and
will last for nine years. Variable costs for this machine are 25
percent of sales and fixed costs are $170,000 per year. The sales
for each machine will be $10.9 million per year. The required
return...
Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandelay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $3,260,000 and will
last for six years. Variable costs are 36 percent of sales and
fixed costs are $400,000 per year. Machine B costs $5,520,000 and
will last for nine years. Variable costs for this machine are 31
percent of sales and fixed costs are $265,000 per year. The sales
for each machine will be $12.9 million per year. The required
return...
Vandelay industries is considering the purchase of a new machine for the production of latex machine...
Vandelay industries is considering the purchase of a new machine
for the production of latex machine a cost $2,900,000 and will last
for six years variable costs are 35% of sales and fixed costs are
$210,000 per year machine because $5,800,000 and will last for nine
years variable cost for this machine or 30% of sales and fixed
costs are $245,000 per year the sales for each machine will be $13
million per year the required return is 10% and...
Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandelay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $1.98 million and will
last for six years. Variable costs are 35 percent of sales and
fixed costs are $187,000 per year. Machine B costs $5,400,000 and
will last for nine years. Variable costs for this machine are 30
percent of sales and fixed costs are $145,000 per year. The sales
for each machine will be $12.4 million per year. The required...
Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandelay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $3,130,000 and will
last for six years. Variable costs are 35 percent of sales, and
fixed costs are $270,000 per year. Machine B costs $5,351,000 and
will last for nine years. Variable costs for this machine are 30
percent of sales and fixed costs are $200,000 per year. The sales
for each machine will be $11.6 million per year. The required
return...
Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandelay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $3,150,000 and will
last for six years. Variable costs are 37 percent of sales and
fixed costs are $290,000 per year. Machine B costs $5,377,000 and
will last for nine years. Variable costs for this machine are 32
percent of sales and fixed costs are $210,000 per year. The sales
for each machine will be $11.8 million per year. The required
return...
Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandelay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $3,310,000 and will
last for six years. Variable costs are 39 percent of sales and
fixed costs are $450,000 per year. Machine B costs $5,585,000 and
will last for nine years. Variable costs for this machine are 34
percent of sales and fixed costs are $290,000 per year. The sales
for each machine will be $13.4 million per year. The required
return...
Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandelay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $3,150,000 and will
last for six years. Variable costs are 37 percent of sales, and
fixed costs are $290,000 per year. Machine B costs $5,377,000 and
will last for nine years. Variable costs for this machine are 32
percent of sales and fixed costs are $210,000 per year. The sales
for each machine will be $11.8 million per year. The required
return...
Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandelay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $3,280,000 and will
last for six years. Variable costs are 38 percent of sales, and
fixed costs are $420,000 per year. Machine B costs $5,546,000 and
will last for nine years. Variable costs for this machine are 33
percent of sales and fixed costs are $275,000 per year. The sales
for each machine will be $13.1 million per year. The required
return...
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