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Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine...

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Finance

Vandelay Industries is considering the purchase of a new machinefor the production of latex. Machine A costs $3,320,000 and willlast for six years. Variable costs are 38 percent of sales andfixed costs are $460,000 per year. Machine B costs $5,598,000 andwill last for nine years. Variable costs for this machine are 33percent of sales and fixed costs are $295,000 per year. The salesfor each machine will be $13.5 million per year. The requiredreturn is 8 percent and the tax rate is 25 percent. Both machineswill be depreciated on a straight-line basis. The company plans toreplace the machine when it wears out on a perpetual basis.

Calculate the EAC for each machine. (A negative answershould be indicated by a minus sign. Do not roundintermediate calculations and enter your answers in dollars, notmillions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89.)

System A:

System B:

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