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Vandalay Industries is considering the purchase of...

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Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $1,920,000 and will last for 8 years. Variable costs are 39 percent of sales, and fixed costs are $177,000 per year. Machine B costs $4,230,000 and will last for 12 years. Variable costs for this machine are 31 percent and fixed costs are $113,000 per year. The sales for each machine will be $8,460,000 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. Assume that the company plans to replace the machine when it wears out on a perpetual basis. Compute the NPV and EAC for both the machines

 

Paper#11974 | Written in 18-Jul-2015

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