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You are considering whether to buy or lease a machine whose purchase price is $12,000. Taxes on the machine will be $580 due in one
You are considering whether to buy or lease a machine whose purchase price is $12,000. Taxes on the machine will be $580 due in one year, $464 due in two years, and $290 due in three years. If you buy the machine, you expect to be able to sell it after three years for $5,000. If you lease the machine for three years, you make an initial payment of $2650 and then three payments of $2650 at the end of each of the next three years. The leasing company will pay the taxes. The interest rate is 7.75% per year, compounded annually. Should you buy or lease the machine? Explain. The present value of leasing is 9510.23 The present value of buying without taking into account the resale value of the machine is Number The present value of resale of the machine is Number The best option would be to x lease the machine, because the present value of the expenses associated with buying is larger than the present value of leasing. buy the machine, because the present value of the expenses associated with buying is larger than the present value of leasing. lease the machine, because the present value of the expenses associated with buying is smaller than the present value of leasing. buy the machine, because the present value of the expenses associated with buying is smaller than the present value of leasing. O O
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