Assume a farmer has a choice of purchasing or leasing a machine. If purchased, it would cost...

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Finance

Assume a farmer has a choice of purchasing or leasing a machine.If purchased, it would
cost $40,000, have annual cash operating expenses of $6,000, and asalvage value of
$10,000 after 8 years. Leasing would require an initial payment of$10,000, lease payments
of $12,500 at the end of each year, including the first, and thesame operating expenses of
$6,000 per year with no salvage value. Regardless of whether themachine is leased or
purchased, it would provide $25,000 of cash inflows each year,including the first year. If the
cost of capital is 10%, which is the better option?
Lease
Buy
Either
Neither

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Assume a farmer has a choice of purchasing or leasing a machine.If purchased, it wouldcost $40,000, have annual cash operating expenses of $6,000, and asalvage value of$10,000 after 8 years. Leasing would require an initial payment of$10,000, lease paymentsof $12,500 at the end of each year, including the first, and thesame operating expenses of$6,000 per year with no salvage value. Regardless of whether themachine is leased orpurchased, it would provide $25,000 of cash inflows each year,including the first year. If thecost of capital is 10%, which is the better option?LeaseBuyEitherNeither