Fabulous wishes to acquire a $100,000 multifaceted cutting machine. The machine is expected to be used for eight years, after which there is a $20,000 expected residual value. If Fez were to finance...

Fabulous wishes to acquire a $100,000 multifaceted cutting machine. The machine is expected to be used for eight years, after which there is a $20,000 expected residual value. If Fez were to finance the cutting machine by signing an eight-year “true” lease contract, annual lease payments of $16,000 would be required, payable in advance. The company could also finance the purchase of the machine with a 14% term loan having a payment schedule of the same general configuration as the lease payment schedule. The asset falls in the five year property class for cost recovery (depreciation) purposes, and the company has a 35% tax rate. What is the present value of the cash flows for each of these alternatives, using the after tax cost of debt as the discount rate? Which alternative is preferred?