tead and is comparing two alternate options: option a is to purchase the machine it is currently renting for $165,000, which will require $22,000 p intenance expenses, or option b, which is to purchase a new, more advanced machine for $250,000, which will require $19,000 per year in ongo penses and will lower botting costs by $11,000 per year. Also, $40,000 will be spent upfront in training the new operators of the machine. Suppom scount rate is 8% per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of each year, as is the rental c sume also that the machines are subject to a CCA rate of 25% and there will be a negligible salvage value in 10 years' time (the end of each mas arginal corporate tax rate is 30% Should Big Rock Brewery continue to rent, purchase its current machine, or purchase the advanced machine? T ecision, 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 i use.) me NPV (rent the machine) is $-253,641 (Round to the nearest dollar) NOV
tead and is comparing two alternate options: option a is to purchase the machine it is currently renting for $165,000, which will require $22,000 p intenance expenses, or option b, which is to purchase a new, more advanced machine for $250,000, which will require $19,000 per year in ongo penses and will lower botting costs by $11,000 per year. Also, $40,000 will be spent upfront in training the new operators of the machine. Suppom scount rate is 8% per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of each year, as is the rental c sume also that the machines are subject to a CCA rate of 25% and there will be a negligible salvage value in 10 years' time (the end of each mas arginal corporate tax rate is 30% Should Big Rock Brewery continue to rent, purchase its current machine, or purchase the advanced machine? T ecision, 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 i use.) me NPV (rent the machine) is $-253,641 (Round to the nearest dollar) NOV
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter12: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...
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