Lakemark Corporation Has Decided to Acquire a Machine, Which Will

Multiple Choice

Lakemark Corporation 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 $8 000, while the new machine would cost $140 226. With the new machine installed, Lakemark would reduce its costs by $22 670 a year. The new machine would have a useful life of 8 years, qualify for a 10% Investment Tax Credit (ITC) and have a salvage value after 8 years of $10 000. This type of machine qualifies for a 20% CCA rate. For an8-year lease the annual payment is expected to be $23 500 with the first payment due upon signing the lease contract. Lakemark's cost of capital is 9%, tax rate is 30% and the cost of raising long-term debt is estimated at 10%. What is the Net Present Value of the lease? Round your final answer tothe nearest dollar.

A) -$6 885
B) $12 004
C) $5 959
D) -$11 961