Beryl's Iced Tea currently rents a bottling machine for $ 52 comma 000

$52,000 peryear, including all maintenance expenses. It is considering purchasing a machine instead and is comparing twooptions:

a. Purchase the machine it is currently renting for $ 165 comma 000

$165,000. This machine will require $ 24 comma 000

$24,000 per year in ongoing maintenance expenses.

b. Purchase anew, more advanced machine for $ 255 comma 000

$255,000. This machine will require $ 17 comma 000

$17,000 per year in ongoing maintenance expenses and will lower bottling costs by $ 15 comma 000

$15,000 per year.Also, $ 40 comma 000

$40,000 will be spent up front to train the new operators of the machine.

Suppose the appropriate discount rate is 7 %

7% per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of eachyear, as is the cost of the rental machine. Assume also that the machines will be depreciated via thestraight-line method over seven years and that they have a10-year life with a negligible salvage value. The marginal corporate tax rate is 35 %

35%.

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.