Question: Ringo Manufacturing is considering the purchase of a new machine for $30,000. The machine is expected to save the firm $4,000 (before tax) per

Ringo Manufacturing is considering the purchase of a new machine for $30,000.

Ringo Manufacturing is considering the purchase of a new machine for $30,000. The machine is expected to save the firm $4,000 (before tax) per year in operating costs over a 5 year period, and can be depreciated on a straight-line basis to a zero salvage value over its life. Alternatively, the firm can lease the machine for $4,200 per year for 5 years, with the first payment due in 1 year. The firm's tax rate is 40%, and its before tax cost of debt is 10%. The Net Present Value of leasing the new machine is:

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