Bear Lake Equipment Company (BLEC) Is Considering an Expansion Which

Bear Lake Equipment Company (BLEC) is considering an expansion which will require a new machine that costs $125,000. BLEC can either lease or buy the equipment. The company's tax rate is 40% and its after tax cost of debt is 5%.
Lease: Annual payments of $26,400 made at the beginning of each year over five years. The lessor covers all maintenance, while the lessee covers insurance and other costs. The lessee has the option to purchase the machine for $31,250 paid along with the final lease payment.
Purchase: The $125,000 cost will be financed over five years with annual end of year payments of $31,580. The machine will be depreciated on the five year MACRS schedule, and the firm will pay $3,500 per year for a service contract to cover all maintenance. The company will cover all insurance and other costs.
-Refer to BLEC.What is the present value of the five years of after-tax cash flows from purchasing the machine?

A) $92,504
B) $108,120
C) $77,351
D) $123,273