Zyllane Distributors Has Decided to Acquire a Machine, Which Will

Multiple Choice

Zyllane Distributors has decided to acquire a machine, which will replace an existing piece ofequipment. The company has the choice between leasing the new machine or purchasing it. Theexisting machine is currently worth $15 000, while the new machine would cost $352 652. With the new machine installed, Zyllane would reduce its costs by $44 800 a year. The new machine would have a useful life of 12 years, qualify for a 10% Investment Tax Credit (ITC) and have a salvage value after 12 years of $50 000. This type of machine qualifies for a 30% CCA rate. For a 10-year lease the annual payment is expected to be $39 566 with the first payment due upon signing the lease contract. Zyllane's cost of capital is 8%, tax rate is 40% and the cost of raising long-term debt is estimated at 9%. What is the Net Present Value of the lease? Round your final answer to the nearest dollar.

A) -$23 030
B) -$18 653
C) -$27 363
D) -$20 027