Nodhead College needs a new computer. It can either buy it for $250,000 or lease it from Compulease. The lease terms require Nodhead to make 6 annual payments (prepaid) of $55,000. Nodhead pays no tax. Compulease pays tax at 35%.

Compulease can depreciate the computer for tax purposes at a CCA rate of 30%, and will close the asset pool at the end of the sixth year. The computer will have no residual value at the end of year 5. The interest rate is 8%.

a. What is the NPV of the lease for Nodhead College?

b. What is the NPV for Compulease?

c. What is the overall gain from leasing?