PLEASE ANSWER ACCURATELY
Buckingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is $2.69 million. Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has just completed a $45,000 feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates: - Marketing: Once the XC-750 is operational next year, the extra capacity is expected to generate $10.15 million per year in additional sales, which will continue for the 10-year life of the machine. - Operations: The disruption caused by the installation will decrease sales by $4.97 million this year. As with Buckingham's existing products, the cost of goods for the products produced by the XC-750 is expected to be 72% of their sale price. The increased production will also require increased inventory on hand of $1.01 million during the life of the project, including year 0 . - Human Resources: The expansion will require additional sales and administrative personnel at a cost of $1.96 million per year. - Accounting: The XC-750 has a CCA rate of 30%, and no salvage value is expected. The firm expects receivables from the new sales to be 14% of revenues and payables to be 10% of the cost of goods sold. Buckingham's marginal corporate tax rate is 35%. What kind of real option does the XC-900 machine provide to Buckingham? Select all that apply. A. The expansion will require additional sales and administrative personnel. B. The XC-900 allows Buckingham the option to expand production starting in year 3. C. If it would be better if production remains the same, Buckingham is under no obligation to utilize all of the XC-900 production capacity. D. If it would be beneficial to expand production, Buckingham will increase production with the XC-900