Mauer Mining Company leases a special drilling press with annual payments of $150,000. The contract calls for rent payments at the beginning of each year for a minimum of six years. Mauer Mining can buy a similar drill for $750,000, but will need to borrow the funds at 8%.

a. Show the two choices on a time line with the cash flow.

b. Determine the present value of the lease payments at 8%.

c. Should Mauer Mining lease or buy this drill?