The JCrew Corporation runs a perpetual encabulator machine, generating revenues averaging $15 million per year. Raw material costs are 60% of revenues, so they are variable costs. There are no other operating costs. JCrew's cost of capital is 15%, and its long-term borrowing rate is 10%. Fidelity Financial proposes a fixed-price contract to supply raw materials at $9 million per year for 8 years

calculate the present value of the encabulator machine with the fixed-price contract. Suppose that JCrew is going to finance the annual cost of fixed-price contract, $9million per year, by the long-term borrowing?

$32.37 million $37.72 million $40.00 million $60.00 million