Beryl's Iced Tea currently rents a bottling machine for $53,000 per year, including all maintenance expenses. It is considering purchasing a machine instead and is comparing two options: a. Purchase the machine it is currently renting for $155,000. This machine will require $24,000 per year in ongoing maintenance expenses. h. Purchase a new, more advanced machine for $250,000. This machine will require $16,000 per year in ongoing maintenance expenses and will lower bottling costs by $12,000 per year. Also, $38,000 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 each year, as is the cost of the rental machine. Assume also that the machines will be depreciated via the straight-line method over seven years and that they have a 10-year life with a negligible salvage value. The marginal corporate tax rate is 35%. Should Beryl's Iced Tea continue to rent, purchase its current machine, or purchase the advanced machine? To make this decision, calculate the NPV of the FCF associated with each alternative. You are a manager at Percolated Fiber, which is considering expanding its operations in synthetic ber manufacturing. Your boss comes into your ofce, drops a consultant's report on your desk, and complains, "We owe these consultants $1.8 million for this report, and I am not sure their analysis makes sense. Before we spend the $17.8 million on new equipment needed for this project, look it over and give me your opinion." You open the report and nd the following estimates (in millions of dollars): Project Year :1- Earnings Forecast 1 2 . . . 9 10 Sales Revenue 27.000 27.000 27.000 27.000 - Cost of Goods Sold 16.200 16.200 16.200 16.200 = Gross Prot 10.800 10.800 10.800 10.800 - General, Sales and Administrative Expenses 1.424 1.424 1.424 1.424 - Depreciation 1.780 1.780 1.780 1.780 = Net Operating Income 7.596 7.596 7.596 7.596