AINOS Company runs a perpetual encabulator machine, generating revenues averaging $40 million per year. Raw material costs are 65% of revenues, so they are variable costs. There are no other operating costs. AINOS Company's cost of capital is 20%, and its long-term borrowing rate is 16%. Fidelity Financial proposes a fixed-price contract to supply raw materials at $26 million per year for 10 years What happens to the operating leverage and business risk of the encabulator machine if AINOS Company agrees to the fixed-price contract? If AINOS Company agrees to the fixed-price contract, the operating leverage increases, and thus assets increases. If AINOS Company agrees to the fixed-price contract, the operating leverage increases, and thus assets decreases. If AINOS Company agrees to the fixed-price contract, the operating leverage decreases, and thus assets decreases. If AINOS Company agrees to the fixed-price contract, the operating leverage decreases, and thus Bassets increases. Continued from the above Question, calculate the present value of the encabulator machine with the fixed-price contract. Suppose that AINOS Company is going to finance the annual cost of fixed-price contract, $26 million per year, by the long-term borrowing $70.00 million $72.83 million $53.34 million $83.53 million