You have to buy a new copier. The cost of the copier is, $1800, plus $390 per year in annual maintenance costs. 150 in cost of emergency service, 150 in ink, 80 in paper. Depreciation expense 200. The copier will last for three years.

Alternatively a local company offers to lease the copier at 700 to you and do the maintenance as well. Depreciation cost 0, paper cost 80, ink 150. Your discount rate of 6.0%, what is the most you would be willing to pay per year to lease the copier (first lease payment is due in one year)?

Which option is better and why?

Please complete in excel using this format and show work/formulas/calculations.

Yes the cost of copier is for one machine and yes it will be sold at the end of its life.

Revenue 3000

New Photocopier Project Pepper Hamilton & Schnelder Law Firm Philadelphia, Pennsylvania Date: October 12, 2018 Buy Option Today: Present Value Co Cost Per Machine No of Machines Initial Outlay CAPEX Cost of Annual Maintenance Cost of Emergency Service Ink Cost Papor Cost 12 12 12 Note: Taxable revenue decreases by the depreciation amount Depreciation Expense Tax Benefits @ 34% Marginal Tax Rate Residual Value Accounting Net Income Cash Flow PV of all Cash Flows 6.0% 6.0% Discount Rate (WACC) NPV of Proposal 6.0% 6.0% New Photocopier Project Pepper Hamilton & Schneider Law Firm Philadelphia, Pennsylvania Date: October 12, 2018 Lease Option Today; Present Value ear ear ear Cost Per Machine No. of Machines Initial Outay CAPEX Cost of Annual Maintenance Cost of Emergency Service Ink Cost Paper Cost 12 12 12 12 Note: Taxable revenue decreases by the depraciation amount Depreciation Expense Tax Benefits @ 34% Marginal Tax Rate Residual Value Accounting Net Income Cash Flow PV of all Cash Flows Discount Rate (WACC) NPV of Proposal 60% 60% 6 0% 6 0%