Beryl's Iced Tea currently rents a bottling machine for $51,000 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 $155,000. This machine will require $22,000 per year in ongoing maintenance expenses.

b. Purchase anew, more advanced machine for $260,000. This machine will require $15,000 per year in ongoing maintenance expenses and will lower bottling costs by $13,000 per year.Also, $39,000 will be spent up front to train the new operators of the machine.

Suppose the appropriate discount rate is 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 40%. 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.