8. Bellingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is $2.75 million. Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has already completed and paid for a $50,000 feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates:

Marketing: Once the XC-750 is operational next year, the extra capacity is expected to generate $10 million per year in additional sales, which will continue for the 10-year life of the machine.

Operations: The disruption caused by the installation will decrease sales by $5 million this year. As with Bellingham's existing products, the cost of goods for the products produced by the XC-750 is expected to be 70% of their sale price. The increased production will require net working capital of 10% of the following year's revenue during the life of the project, including year 0.

Human Resources: The expansion will require additional sales and administrative personnel at a cost of $2 million per year.

Accounting: The XC-750 will be depreciated via the straight-line method over the 10-year life of the machine. Bellingham's marginal corporate tax rate is 21%.

The appropriate cost of capital for the expansion is 10%.

Should Bellingham Packaging purchase the machine? Be quantitatively specific with your answer. [14]