XYZ Inc is considering the purchase of a new machine for the production of computers.Machine A costs
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Question:
XYZ Inc is considering the purchase of a new machine for the production of computers.Machine A costs $6,500,000 and will last for 6 years.Variable costs are 20% of sales and fixed costs are $850,000 per year.Machine B costs $11,000,000 and will last for 10 years.Variable costs for the machine are 15% of sales and fixed costs are $1,000,000 per year.The sales for each machine will be $5,000,000 per year.The required rate of return is 10%, the tax rate is 21%, and both machines will be depreciated using straight-line with a no salvage value. Calculate the equivalent annual annuity for Machine B.(Round to 2 decimals)
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