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A contractor is considering whether to buy or lease a new machine for her layout site work. Buying a new machine will cost $120,000, with a residual value of $12,000 after the machine's useful life of 8 years. On the other hand, leasing requires an annual lease payment of $3000. Assuming that the MARR is 15% and on the basis of an internal rate of return analysis, which alternative should the contractor be advised to accept? The cash flows are as follows: Year (n) Alt. A (buy) Alt. B (lease) 0 -$12,000 -$3000 1 -$3000 2 -$3000 3 -$3000 4 -$3000 5 -$3000 6 -$3000 7 -$3000 8 +$1,200 $0
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