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  3. you n n a perpetual encabulator machine, which gen

You n n a perpetual encabulator machine, which generates evenues averaging $27 million per year....

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You n n a perpetual encabulator machine, which generates evenues averaging $27 million per year. Raw material costs are 60% of revenues. These costs are va able hey are always proportional to revenues. There are no other operating costs. The cost of capital is 12%. Your firms long term borrowing rate is 9% Now you are approached by Studebaker Capital Corp., which proposes a fixed-price contract to supply raw materials at $16.2 million per year for 12 years. a. What happens to the operating leverage and business risk of the encabulator machine if you agree to this fxod-price contract? Operating leverage and business risk increases o operating leverage and business risk decreases b. Calculate the present value of millions. Round your answers to the nearest whole dolar amount.) the encabulator machine with and without the fixed-price contract. (De not round intermediate calculations. Enter your answers in dollars not in Present Value Wth contract Without contract

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