Comparing Mutually Exclusive Projects [LO4] Vandalay Industries is considering t

Question

Comparing Mutually Exclusive Projects [LO4] Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,100,000 and will last for six years. Variable costs are 35 percent of sales, and fixed costs are $240,000 per year. Machine B costs $5,300,000 and will last for nine years. Variable costs for this machine are 30 percent of sales and fixed costs are $175,000 per year. The sales for each machine will be $11 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. If the company plans to replace the machine when it wears out on a perpetual basis, which machine should you choose?

Explanation / Answer

i have choose machine b why? machine A last six years maintain variable cost 35% of sales machine B last nine years maintain variable cost 30% of sale machine A and machine timing different 3 year but variable cost machine A to machine B only 5% decrease so, calculate profit machine B is a profit then i choose machine B is correct

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.