7. NB Power plans to acquire a large water turbine for one of its dams by...

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7. NB Power plans to acquire a large water turbine for one of its dams by entering into a long-termlease agreement with the Atlantic Steel Ltd (ASL). ASL will provide the turbine under either of the following lease arrangements: 1. NB Power is to pay $2,500,000 at the beginning of the lease (delivery date) and $1,000,000 at the end of each of the next five years. At the end of the fifth year, NB Power may take title to the turbine for an additional payment of $3,000,000 2. NB Power is to pay $2,000,000 at the beginning of the lease and $900,000 at the end of each of the next ten years. At the end of the tenth year, NB Power may take title for an additional payment of $1,300,000. Under either proposal, NB Power will buy the turbine at the end of the lease. NB power is a government monopoly that does not stress the earning of profit and is not evaluating alternative investments. However, NB Power attempts to minimize its costs as it realizes that the cost of capital to it is about 8%. Required. Advise NB Power on which lease proposal results in the lower cost for the computer system when the associated cash flows are discounted at an annual interest rate of 8%. 7. NB Power plans to acquire a large water turbine for one of its dams by entering into a long-termlease agreement with the Atlantic Steel Ltd (ASL). ASL will provide the turbine under either of the following lease arrangements: 1. NB Power is to pay $2,500,000 at the beginning of the lease (delivery date) and $1,000,000 at the end of each of the next five years. At the end of the fifth year, NB Power may take title to the turbine for an additional payment of $3,000,000 2. NB Power is to pay $2,000,000 at the beginning of the lease and $900,000 at the end of each of the next ten years. At the end of the tenth year, NB Power may take title for an additional payment of $1,300,000. Under either proposal, NB Power will buy the turbine at the end of the lease. NB power is a government monopoly that does not stress the earning of profit and is not evaluating alternative investments. However, NB Power attempts to minimize its costs as it realizes that the cost of capital to it is about 8%. Required. Advise NB Power on which lease proposal results in the lower cost for the computer system when the associated cash flows are discounted at an annual interest rate of 8%.