Iced Tea currently rents a bottling machine for $54,000 per year, including all maintenance expenses It is considering purchasing a machine instead and is comparing two options Purchase the machine it is currently renting for $150,000 This machine will require $22,000 per year in ongoing maintenance expenses Purchase a new, more advanced machine for $265,000 This machine will require $20,000 per year in ongoing maintenance expenses and will lower bottling costs by $11,000 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 ba paid at the end of each year, as is the cost of th s are hine Assume also that the machines will be depreciated 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 NP of the FF associated with each alternative

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Iced Tea currently rents a bottling machine for $54,000 per year, including all maintenance expenses. It is considering purchasing a machine instead and is comparing

Iced Tea currently rents a bottling machine for $54,000 per year, including all maintenance expenses. It is considering purchasing a machine instead and is comparing two options:

Purchase the machine it is currently renting for $150,000. This machine will require $22,000 per year in ongoing maintenance expenses.
Purchase a new, more advanced machine for $265,000. This machine will require $20,000 per year in ongoing maintenance expenses and will lower bottling costs by $11,000 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 ba paid at the end of each year, as is the cost of th

s are

hine.

Assume also that the machines will be depreciated 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 NP of the FF associated with each alternative.