4.

value: 10.00 points

Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2,270,000 and will last for 4 years. Variable costs are 39 percent of sales, and fixed costs are $143,000 per year. Machine B costs $4,370,000 and will last for 7 years. Variable costs for this machine are 28 percent of sales and fixed costs are $111,000 per year. The sales for each machine will be $8.74 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.

Required:

(a)	If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine A? (Do not round your intermediate calculations.)
	(Click to select) $2,854,966.28 $-4,598,910.75 $-2,826,033.72 $-8,958,146.65 $-4,160,919.25

(b)	If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine B? (Do not round your intermediate calculations.)
	(Click to select) $-2,341,952.03 $-11,499,525.5 $-12,710,001.87 $-11,401,603.35 $3,339,047.97