Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $1,840,000 and will last for 4 years. Variable costs are 36 percent of sales, and fixed costs are $122,000 per year. Machine B costs $4,220,000 and will last for 6 years. Variable costs for this machine are 27 percent of sales and fixed costs are $103,000 per year. The sales for each machine will be $8.44 million per year. The required return is 10 percent and the tax rate is 21 percent. Both machines will be depreciated on a straight-line basis. If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine A? EAC If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine B? EAC Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $1,840,000 and will last for 4 years. Variable costs are 36 percent of sales, and fixed costs are $122,000 per year. Machine B costs $4,220,000 and will last for 6 years. Variable costs for this machine are 27 percent of sales and fixed costs are $103,000 per year. The sales for each machine will be $8.44 million per year. The required return is 10 percent and the tax rate is 21 percent. Both machines will be depreciated on a straight-line basis. If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine A? EAC If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine B? EAC
Expert Answer:
Answer rating: 100% (QA)
Id be glad to help you calculate the Equivalent Annual Cost EAC for both Machine A and Machine B incorporating the provided information and addressing ... View the full answer
Related Book For
Corporate Finance Core Principles and Applications
ISBN: 978-0077905200
3rd edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
Posted Date:
Students also viewed these finance questions
-
6. Let C'(x) = 2x+5 be the cost to produce x batches of widgets, and let R(x) = x+8x be the revenue in thousands of dollars. (a) Find the minimum break-even quantity. (b) Find the maximum revenue....
-
Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,900,000 and will last for six years. Variable costs are 35 percent of sales, and fixed...
-
Sandhill Company manufactures hockey pucks and soccer balls, For both products, materials are added at the beginning of the production process and conversion costs are incurred evenly. Sandhill uses...
-
Kellerman Company purchased a building and land with a fair market value of $550,000 (building, $425,000, and land, $125,000) on January 1, 2018. Kellerman signed a 20-year, 6% mortgage payable....
-
Think of a situation youve experienced in which some communication process you were involved in did not go as well as it might have. Any kind of communication will work for the example it doesnt...
-
What recruiting objectives are being met through the use of online recruitment?
-
Would a U.S. court override an employers contractual rights (as the Supreme Court of Japan did) because of a countervailing socially accepted view? What if the employment contract was between a drug...
-
Tiago makes three models of camera lens. Its product mix and contribution margin per unit follow: Lens A Lens B Lens C Required: Percentage of Unit Sales 30% 37 33 Contribution Margin per Unit $ 45...
-
A company wants to buy a new machine to replace one, which is having frequent breakdown. It received offers for two models, M1 and M2. Further details regarding these two models are given below...
-
Show that an ideal gas follows the cyclic relationship in P, v, and T.
-
Calculate the enthalpy and entropy change of C2H6 from a state at 300 K and 30 bar to a state at 400 K and 50 bar using departure functions.
-
Methane fl owing at 2 mol/min is adiabatically compressed from 300 K and 1 bar to 10 bar. What is the minimum work required?
-
Select the ideal liquid for immersion cooling of an electronic system.
-
The normal melting point of pure solid 1 is Tm. Consider now that the same pure solid 1 is melting into a liquid that initially contains pure 2. How does the temperature at which 1 will melt into the...
-
For the tension load N* = 300 kN shown in the figure below, according to AS4100: a) Design an equal angle member b) Design an unequal angle member connected through the larger leg. N* = 300 Single...
-
Listed below are common types of current liabilities, contingencies, and commitments: a. Accounts payable b. Bank loans and commercial paper c. Notes payable d. Dividends payable e. Sales and excise...
-
Trantum Industries has a zero coupon bond issue that matures in two years with a face value of $50,000. The current value of the companys assets is $31,000, and the standard deviation of the return...
-
The treasurer of Amaro Canned Fruits, Inc., has projected the cash fl ows of projects A, B , and C as follows. Suppose the relevant discount rate is 12 percent a year. a. Compute the profitability...
-
The market value balance sheet for Outbox Manufacturing is shown here. Outbox has declared a 25 percent stock dividend. The stock goes ex dividend tomorrow (the chronology for a stock dividend is...
-
Suppose a bond is taxable for both federal and state purposes. Let Rb = the BTROR on the bond, tfed = the federal tax rate, and tst = the state tax rate. Determine the ATROR (i.e., after federal and...
-
Under what conditions are the Exempt Model and Pension Model equivalent? Under what conditions would one model perform better than the other? How does the \($6,500\) limitation on deductible and Roth...
-
Harry wants to contribute either \($6,500\) (BT\($)\) to a traditional deductible IRA or \($6,500\) (AT\($)\) to a Roth IRA. His current tax rate is 30% for ordinary income and 15% for capital gains....
Study smarter with the SolutionInn App