Vandelay Industries is considering the purchase of a new machine for the production of
latex. Machine A costs $3,210,000 and will last for six years. Variable costs are 37
percent of sales, and fixed costs are $350,000 per year. Machine B costs $5,455,000
and will last for nine years. Variable costs for this machine are 32 percent of sales and
fixed costs are $240,000 per year. The sales for each machine will be $12.4 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. (A negative answer should be indicated 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., 1,234,567.89.)
System A
System B
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