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Beryis iced Toa currently ronts a botting machino for 552,000 por yoor, includry all muintonance exponses, It is considering purchasing a machine insteod, and is

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Beryis iced Toa currently ronts a botting machino for 552,000 por yoor, includry all muintonance exponses, It is considering purchasing a machine insteod, and is comparing two options: A. Purchase the machino it is curcently rentirg for $165,000. This machine wil requiro $21,000 per yoar in ongoing malatenance axpenses. B. Purchase a new, moro advonoed machine for $250.000. This machine will require $17,000 por year in ongoing maintonance exponses and will lower botting costs by $15,000 por year. Nso, $39,000 will be speet uptront trining the new operntors of the machine. Suppose the appropriale decount rate is 8% per year and the machine is purchased todiay Maintenance and boiting costs are pald at the end of each yoar, as is the rental of the machine. Assume nhes that the machines wil be deprecisted via tho stright the meehod over soven years and that they have a ten-yoar ilo weth a nogligitle salvige value. The marginal corporale tax rato is 40%. Should Bergis loed Toa continue to rent, purchase its current machine, or purchase the advancod machine? To make this declebor, calculato the NPV of the FCF associated with oach allematie. (Note: the NiP will be nogative, and represents the PV of the costs of the machine in oach case)

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