In: Finance
Vandalay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $3,114,000 and will
last for six years. Variable costs are 35 percent of sales, and
fixed costs are $255,000 per year. Machine B costs $5,328,000 and
will last for nine years. Variable costs for this machine are 30
percent of sales and fixed costs are $190,000 per year. The sales
for each machine will be $11.3 million per year. The required
return is 10 percent, and the tax rate is 35 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.
Calculate the NPV for each machine. (A negative answer
should be indicated by a minus sign. Do not round intermediate
calculations and round your answers to 2 decimal places, e.g.,
32.16.)
NPV | |
Machine A | $______________ |
Machine B | $ ______________ |
Calculate the EAC for each machine. (Your
answers should be a negative value and indicated by a minus
sign. Do not round intermediate calculations and
round your answers to 2 decimal places, e.g.,
32.16.)
EAC | |
Machine A | $____________ |
Machine B | $____________ |