he Rascal Corporation runs a perpetual encabulator machine, generating revenues averaging $25 million per year. Raw material costs are 55% of revenues, so they are variable costs. There are no other operating costs. Rascal's cost of capital is 18%, and its long-term borrowing rate is 8%. Fidelity Financial proposes a fixed-price contract to supply raw materials at $13.75 million per year for 20 years.

1. Calculate the present value of the encabulator machine with the fixed-price contract and without the fixed-price contract.