TFC Corporation needs to obtain a new machine. The machine has a useful life of 8 years, a cost of $14,500,000 (including all costs related to getting the machine in place and ready). At the end of the 8 years, the machine is expected to have a value of $0 (a scrap dealer, or the lessor, will remove it for free). For simplicity, we’ll assume the machine will be installed and ready to use on January 2, 2021 (of course, January 1 is a holiday). Its useful life will end December 31, 2028. TFC has obtained two alternatives for obtaining the machine. As the top finance person in the organization, you are asked to analyze the alternatives and identify your choice. Alternative A: Purchase the machine for $14,500,000, paid in cash on January 2, 2021. The company will borrow the funds from a local bank with monthly payments of $191,000. The first payment is due February 1, 2021, and then due the first of each month through December 1, 2028. The interest rate used by the bank isn’t available (crazy, but it’s not). Alternative B: National Leasing Co. has offered to provide the machine, installed and ready to run by January 2, 2021. Lease payments will be paid quarterly, beginning January 2, 2021, and ending October 1, 2028. The lease payment will be $561,400. At the end of the lease, National Leasing will remove the machine and dispose of it. National Leasing declined to provide the implicit interest rate.

Prepare an analysis of the two alternatives that clearly demonstrates which is the better option from a purely financial perspective. You must do this analysis in Excel. Your analysis must use time value of money concepts and calculations. Use formulas in Excel, do not type numbers except for input data (like payment).