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Problem 10-24 Comparing Mutually Exclusive Project...

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Problem 10-24 Comparing Mutually Exclusive Projects [LO4] Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,126,000 and will last for six years. Variable costs are 30 percent of sales, and fixed costs are $265,000 per year. Machine B costs $5,346,000 and will last for nine years. Variable costs for this machine are 25 percent of sales and fixed costs are $200,000 per year. The sales for each machine will be $11.5 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.

 

Paper#9532 | Written in 18-Jul-2015

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