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beryl ice tea currently rents a bottling machine for 50,000 per year, including all maintenance expenses. it is considering purchasing a machine...
beryl ice tea currently rents a bottling machine for 50,000 per year, including all maintenance expenses. it is considering purchasing a machine instead and is comparing two options.
1.) purchase the machine it is currently renting for 15,000. this machine will require 20,000 per year in ongoing maintenance expenses.
2.) purchase a new, more advance machine for 250,000. this machine will require 15,000 per year in ongoing maintenance expenses and will lower bottling costs by 10,000 per year. Also, 30,000 will be spent upfront in training the new operators of this machine.
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 depreciate via the straight line method over seven years and that they have a ten year life with no salvage value. the corporate tax is 35%. should beryl's iced tea continue to rent, purchase its current machine, or purchase an advanced machine?
