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answer all parts please. Also show work, & explain. Beryis iced Tea currenty rents a botting machine for $52,000 per year, including all maintenance expenses.
answer all parts please. Also show work, & explain.
Beryis iced Tea currenty rents a botting machine for $52,000 per year, including all maintenance expenses. It is considering purchasing a machine instjad, and is comparing wo optons: A Purchase the machine it is currently renang for $155,000. This machine will requie $20,000 per year in cogoing mantenshce expenses B. Purchase a new, moxe advanced machine for $265,000. This machine will tequire $16,000 per year in ongoing mainsenance expenses and wat lower boting costs by $12000 per year. Atso 340,000 will be spent upfront training the new operalors of the machine. Suppose the appropriale dscount rate is B\% per yoar and the machine is purchased today Maintenance and boting ooets are paid at the end of each yooc, as is the rental of the machine. Assume also that the machines will be depreciased via the straight the method over seven yean and that they have a ton-year Whe with a negligble salvage vave. The marginal corporale tax rate is 28%. Should Beryfs loed Tea continue lo rent, purchase as curtent machine, of purchase the advanced machine? To make this decision, calculate the NPV of the FCF associaled with each aliermative. (Nete: the NPV wil be negative, and represents the PV of the costs of the machine in each ease.) The NPV of renting the machins is 1 (Round to the nearest doliat. Enter a negative NPV as a negative value.) Step by Step Solution
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