Problem $6-18$ Comparing Mutually Exclusive Projects

Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $$3,310,000$ and will last for six years. Variable costs are $39$ percent of sales, and fixed costs are $$450,000$ per year. Machine B costs $$5,585,000$ and will last for nine years. Variable costs for this machine are $34$ percent of sales and fixed costs are $$290,000$ per year. The sales for each machine will be $$13\mathrm{.}4$ million per year. The required return is $9$ percent, and the tax rate is $24$ 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 EAC for each machine. $($Note that the cash flows associated with costs are negative. Indicate a negative EAC by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to $2$ decimal places, e$.$g$.,1,234,567\mathrm{.}89.)$

System A

System B