Question: A contractor is considering whether to purchase or lease a new machine for his layout site work. Purchasing a new machine will cost $12,000 with

A contractor is considering whether to purchase or lease a new machine for his layout site work. Purchasing a new machine will cost $12,000 with a of $1200 at the end of the machine's useful life of 8 years. On the other hand, leasing requires an annual lease payment of $3000. Assuming that the is 15% and on the basis of an analysis, which alternative should the contractor be advised to accept. The cash flows are as follows:

Year (n AILA (purchase)Alt. B (lease) -$12,000 $3000 -3000 3000 -3000 -3000 -3000 5 +1200 -3000

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