Ben Alexander, an enterprising young engineering graduate who worked part-time as a machinist during college, decided to establish his own mechanical design and specialty manufacturing business after graduating.

His workload is increasing due to a few good contracts, and he is spending longer hours on hands-on machining tasks producing fabricated metal products. Ben is considering the purchase of a bed-type milling machine with automatic table feed and other features. The cost of the machine is \($21,000\) with an expected life of 12 years. He would keep it for only 5 years, however, and be able to sell it for \($5,000\) at that time. Ben has a time limitation of only 500 hours per year that he can devote to milling operations, even though he can sell everything he produces.

If he buys the mill, he will be able to complete parts in 4 minutes each. If he does not purchase the mill, he will continue producing with current equipment at a rate of 12 minutes each. Each part he turns out provides a net income before taxes of \($2.\) A third alternative, in addition to buying or not, includes leasing the milling machine for \($4,000\) paid annually at the beginning of the year. Marginal taxes are 40 percent, and the after-tax MARR is 9 percent.

a. Determine the annual worth associated with buying the milling machine. Be sure to give the appropriate MACRS-GDS property class.

b. Determine the annual worth of continuing with current equipment.

c. Determine the annual worth of leasing.

d. Determine the annual lease cost that makes Ben indifferent between purchasing and leasing the new milling machine.