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 a salvage 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 the same operating expenses of $6,000 per year with no salvage value. Regardless of whether the machine 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? 
a. 
Lease 

b. 
Buy 

c. 
Either 

d. 
Neither 
Option "B" BUY
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