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Big Rock Brewery currently rents a bottling machine for $52,000 per year, including all maimenance expenses. The company is considering purchasing a machine instead and
Big Rock Brewery currently rents a bottling machine for $52,000 per year, including all maimenance expenses. The company is considering purchasing a machine instead and is comparing two alternate options: opson a is to purchase the machine it is currently renting for $155,000, which will require $24,000 per year in ongoing maintenance expensos, or option b, which is fo purthase a new, more advanced machine for $260,000, which wil require $15,000 per year in ongoing maintenance expenses and will lower bolting costs by $15,000 per year Also, $35,000 wil be spent upfront in training the new operafors of the machine. Suppose the appropriate dscount rito is 7% per year and the machine is purchased today Maintenance and botting costs are paid at /ine end of each year, as is the rental of the machine. Assume olso that the machines are subject to a CCA rate of ZWF and there will be a negligble salvage value in 10 years' time (tite end of each machine's of the FCF associated with each allemasive. (Note: the NPV will be negative, and represents the PV of the costs of the machine in each case) The NPV (rent the machine) is : (Round to the nearest dollar) The MPV (purchase the current machine) is $ (Found to the nearest dollar)
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