HW # 4 CLASS EXERCISE The management of The Alexandrov Company decided to acquire the use of a machine to be used in its manufacturing process . The machine it needs is manufactured only by Chang , Incorporated . The machine can be used for ten years and then sold for $10, 000 at the end of its useful life . Chang's options : management has presented Alexandrov with the following acquisition Lease : The machine could be leased for a ten- year period for an annual lease payment of $25, 000, with the first payment due on the date that the agreement is signed . All maintenance and insurance costs for the machine , which are expected to be about $5, 000 per year , would be paid by Chang , and the machine would be returned to Chang at the end of the lease term . Purchase : The machine could be purchased for $130, 000 in cash Assuming that ( 1 ) Alexandrov and Chang will agree on a transaction on November 30 , 2010 , and ( II ) the current interest rate for Alexandrov's long- term borrowing is 12% , which of the two options would be the most economically attractive to Alexandrov ? Prepare a formal schedule to support your decision