value: 10.00 points Vandalay Industries is considering the purchase of a new mac

Question

value: 10.00 points Vandalay 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 and fixed costs are $170,000 per year. The sales for each machine will be $10.9 million per year. The required return is 9 percent and the tax rate is 34 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. (Nogative 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) NPV Machine A Machine B Calculate the EAC for each machine. (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) EAC Machine /A Machine B Which machine should you choose? Machine A Machine B check my work

Explanation / Answer

1.         

NPV:

Machine A: -$12,898,125.07

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