Question
A contractor is considering whether to buy or lease a new machine for her layout site work. Buying a new machine will cost $12,000 with
A contractor is considering whether to buy or lease a new machine for her layout site work. Buying a new machine will cost $12,000 with a salvage value of $1200 after the machine's useful life of 8 years. On the other hand, leasing requires an annual lease payment of $2000 (at the beginning of each year). Assume an interest rate of 15%, and that the machine will generate a yearly benefit of $4000. Which option is the better investment, and what is the Net Present Worth of the better investment?
A. Leasing, $6975
B. Leasing, -$551
C. Purchase, $6975
D. Purchase, -$551
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