Question 3: Unicon Labels needs to expand its facilities. To do so, the machine costing $200,000. The machine can be leased on lease and purchase plans are as follows:- s. 1o do so, the company must acquire a ne machine can be leased or purchased. The terms of the Lease: The leasing arrangement requires beginning arrangement requires beginning-of-year payments of $65,000 over 4 years. All other costs will be paid by the lessor. Lesse costs will be paid by the lessor. Lessee will exercise its option to purchase the asset for $20,000 at the termination of the lease contract. over furchase: If the company purchases the machine its cost of $800,000 will be financed 10% loan requiring equal end-of-year payments. The machine will be curated under MACRS using a three-year recovery period, with annual rates provided below: Yol Yr2 Yr3 Yr4 Depreciation rates 33% 45% 15% 7% Unicon Labels will pay $10,000 per year for the service contract that covers all maintenance cost. Insurance premium of $3,000 per year is required to be paid in advance. The company plans to keep the machine and use it beyond its 5-year recovery period. Unicon's tax rate is 30% Which alternative - lease or purchase - would you recommend? [Total: 20 marks]