Beryl's Iced Tea currently rents a bottling machine for $ 51 comma 000

$51,000 peryear, including all maintenance expenses. It is considering purchasing a machineinstead, and is comparing twooptions:

a. Purchase the machine it is currently renting for $ 155 comma 000

$155,000. This machine will require $ 25 comma 000

$25,000 per year in ongoing maintenance expenses.

b. Purchase anew, more advanced machine for $ 265 comma 000

$265,000. This machine will require $ 15 comma 000

$15,000 per year in ongoing maintenance expenses and will lower bottling costs by $ 14 comma 000

$14,000 per year.Also, $ 37 comma 000

$37,000 will be spent upfront training the new operators of the machine.

Suppose the appropriate discount rate is 9 %

9% per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of eachyear, as is the rental of the machine. Assume also that the machines will be depreciated via thestraight-line method over seven years and that they have aten-year life with a negligible salvage value. The corporate tax rate is 20 %

20%. ShouldBeryl's Iced Tea continue torent, purchase its currentmachine, or purchase the advancedmachine? To make thisdecision, calculate the NPV of the FCF associated with each alternative.

Note: the NPV will benegative, and represents the PV of the costs of the machine in each case.