Question: costs $3,132,000 and will last for six years. Variable costs are 35 percent of sales, and fixed costs are $270,000 per year. Machine B costs
costs $3,132,000 and will last for six years. Variable costs are 35 percent of sales, and fixed costs are $270,000 per year. Machine B costs $5,355,000 and will last for nine years. Variable costs for this machine are 30 percent of sales and fixed costs are $205,000 per year. The sales for each machine will be $11.6 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. The company plans to replace the machine when it wears out on a perpetual basis.
| Calculate the NPV 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).) |
| NPV | |
| Machine A | $ |
| Machine B | $ |
| Calculate the EAC for each machine. (Your answers should be a negative value and 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 | $ |
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