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The ABC Company is considering the purchase of a new machine for $60,000. The machine is expected to save the firm $15,000 per year in
The ABC Company is considering the purchase of a new machine for $60,000. The machine is expected to save the firm $15,000 per year in operating costs over a 5 year period, and can be depreciated on a straight-line basis to a zero salvage value over its life. Alternatively, the firm can lease the machine for $9,000 per year for 5 years, with the first payment due in 1 year. The firm's tax rate is 34%, and its cost of debt is 11%. Calculate the NPV of the lease versus the purchase decision and the reservation payment of the lessee. * 29200; 36234 O 49000; 15000 9200; 16000 0 19200; 16234
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