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P8-15 (similar to) Question Help Beryl's lced Tea currently rents a botling machine for $53,000 per year, including all maintenance expenses. It is considering purchasing
P8-15 (similar to) Question Help Beryl's lced Tea currently rents a botling 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 S160,000. This machine will require S20,000 per year in ongoing maintenance expenses. B. Purchase a new, mcre advanced machine for $260,000. This machine will require $17,000 per year in ongoing maintenance expenses and will lower bottling by $14,000 peryear. Also, $40,000 will be spent upfront training the new operators of the machine Suppose the appropriate discount rate is 9% per year and the machine is purchased today. Maintenance and botting costs are paid at e end of each year, as is the rental o the machine. Assume also at the machines will be depreciated via the straight-line me over seven years and that 1hey have a ten-year life with a negligible salvage value. The marg na corporate a rate is 30%. Should Beryl's ced Tea continue o ent purchase its current machine, o purchase the advanced machine? To make this decision, calculate the NPV of the FCF associated with each alternative. (Note: the NPV will be negative, and represents the PV of the costs of the machine in each case.) The NPV of renting the machine is S -238,095. Round to the nearest dollar. Enter a negative NPV as a negative value.) The NPV of option A is $-215,336. Round to the nearest dollar. Enter a negative NPV as a negative value.) The NPV of option B is S 257,396 (Round to the nearest dollar. Enter a negative NPV as a negative value.)
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