Question: The Old School is trying to decide whether it should purchase or lease a new high-speed photocopier machine. It will cost the school $14,000 to

The Old School is trying to decide whether it should purchase or lease a new high-speed photocopier machine. It will cost the school $14,000 to purchase the copier and $750 each year to maintain the machine over the course of its 6-year useful life. At the end of the sixth year, Old School expects to be able to sell the copier for $1,000. A dealer has offered to lease the school the same copier for a payment of $750 at the beginning of the lease plus lease payments of $3,450 per year for 4 years. Lease payments include all maintenance. The dealer was unable to offer a least longer than four years. Lease payments would be made at the end of each year. If Old School's discount rate is 8%, which alternative should it choose and why? (2pts) Inputs Equipment Purchase Residual Value Year of Residual Recovery 69 69 14,000 1,000 6 Useful life for ownership 6 Annual Maintenance Cost $ 750 Up-front Lease Payment 750 Annual Lease Payments Discount Rate Length of Lease Period $ 3,450 8% 4 01234566 Lease 0 $ (750.00) 1 $ (3,450.00) Buy 2 $ (3,450.00) 3 $ (3,450.00) 4 $ (3,450.00) 5 6 6 SSSSSSSS $ (14,000.00) (750.00) (750.00) (750.00) (750.00) (750.00) (750.00) 1,000.00 Net Present Cost Annualized Cost - NPC/nper

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