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Should Beryl’s Iced Tea continue to rent, purchase its current machine, or purchase the advanced machine?

17 / 01 / 2019 Research Papers

This paper circulates around the core theme of Should Beryl’s Iced Tea continue to rent, purchase its current machine, or purchase the advanced machine? together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.

Beryl’s Iced Tea currently rents a bottling machine for $55,000 per year, including all… 1 answer below » Beryl’s Iced Tea currently rents a bottling machine for $55,000 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 $165,000. This machine will require $23,000 per year in on-going maintenance expenses. B. Purchase a new, more advanced machine for $260,000. This machine will require $17,000 per year in on-going maintenance expenses and will lower bottling costs by $11,000 per year. Also, $38,000 will be spent upfront training the new operators of the machine. Suppose the View complete question » Beryl’s Iced Tea currently rents a bottling machine for $55,000 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 $165,000. This machine will require $23,000 per year in on-going maintenance expenses. B. Purchase a new, more advanced machine for $260,000. This machine will require $17,000 per year in on-going maintenance expenses and will lower bottling costs by $11,000 per year. Also, $38,000 will be spent upfront training the new operators of the machine. Suppose the appropriate discount rate is 7% per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of each year, as is the rental of the machine. Assume also that the machines will be depreciated via the straight-line method over 7 years and that they have a 10 year life with a negligible salvage value. The marginal corporate tax rate is 38%. Should Beryl’s Iced Tea continue to rent, purchase its current machine, or 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.) View less » Oct 24 2015 10:35 AM


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