In: Finance
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 $2,004,327 per year. Machine B costs $4.89 million and will last for nine years. Variable costs for this machine are 22% of sales and fixed costs are $1,280,117 per year. The sales for each machine will be $9.3 million per year. The required return is 9 %, 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)
Topic: Capital Budgeting Problem