Question
In: Finance
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2,370,000 and will last for 3 years. Variable costs are 38 percent of sales, and fixed costs are $134,000 per year. Machine B costs $4,210,000 and will last for 5 years. Variable costs for this machine are 26 percent of sales and fixed costs are $110,000 per year. The sales for each machine will be $8.42 million per year. The required return is 10 percent and the tax rate is 21 percent. Both machines will be depreciated on a straight-line basis.
If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine A?
If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine B?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandalay Industries is considering the purchase of a new machine
for the production of latex.
Machine A costs $2,900,000 and will last for six years. Variable
costs are 35% of sales and fixed
costs are $170,000 per year. Machine B costs $5,100,000 and will
last for nine years. Variable
costs for this machine are 30% of sales and fixed costs are
$130,000 per year. The sales for each
machine will be $10 million per year. The required return is 10%...
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandalay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $3,048,000 and will
last for six years. Variable costs are 40 percent of sales, and
fixed costs are $195,000 per year. Machine B costs $5,229,000 and
will last for nine years. Variable costs for this machine are 35
percent of sales and fixed costs are $130,000 per year. The sales
for each machine will be $10.1 million per year. The required
return...
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandalay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $3,132,000 and will
last for six years. Variable costs are 35 percent of sales, and
fixed costs are $270,000 per year. Machine B costs $5,355,000 and
will last for nine years. Variable costs for this machine are 30
percent of sales and fixed costs are $205,000 per year. The sales
for each machine will be $11.6 million per year. The required
return...
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandalay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $2,300,000 and will
last for 4 years. Variable costs are 33 percent of sales, and fixed
costs are $120,000 per year. Machine B costs $4,460,000 and will
last for 7 years. Variable costs for this machine are 32 percent of
sales and fixed costs are $130,000 per year. The sales for each
machine will be $8.92 million per year. The required return...
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandalay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $3,054,000 and will
last for six years. Variable costs are 35 percent of sales, and
fixed costs are $200,000 per year. Machine B costs $5,238,000 and
will last for nine years. Variable costs for this machine are 30
percent and fixed costs are $135,000 per year. The sales for each
machine will be $10.2 million per year. The required return is 10...
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandalay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $1,880,000 and will
last for 4 years. Variable costs are 36 percent of sales, and fixed
costs are $153,000 per year. Machine B costs $4,310,000 and will
last for 7 years. Variable costs for this machine are 28 percent of
sales and fixed costs are $93,000 per year. The sales for each
machine will be $8.62 million per year. The required return...
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandalay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $2,900,000 and will
last for six years. Variable costs are 35% of sales and fixed costs
are $170,000 per year. Machine B costs $5,100,000 and will last for
nine years. Variable costs for this machine are 30% of sales and
fixed costs are $130,000 per year. The sales for each machine will
be $10 million per year. The required return is 10%...
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandalay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $3,090,000 and will
last for six years. Variable costs are 35 percent of sales, and
fixed costs are $230,000 per year. Machine B costs $5,292,000 and
will last for nine years. Variable costs for this machine are 30
percent of sales and fixed costs are $165,000 per year. The sales
for each machine will be $10.8 million per year. The required
return...
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine...
Vandalay Industries is considering the purchase of a new machine
for the production of latex. Machine A costs $2,360,000 and will
last for 6 years. Variable costs are 39 percent of sales, and fixed
costs are $122,000 per year. Machine B costs $4,310,000 and will
last for 9 years. Variable costs for this machine are 29 percent of
sales and fixed costs are $111,000 per year. The sales for each
machine will be $8.62 million per year. The required return...
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine...
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...
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