Question: A Plc. needs a new computer that costs 750. It can either buy it or lease it from the computer leasing company. The computer will

A Plc. needs a new computer that costs 750. It can either buy it or lease it from the computer leasing company. The computer will be depreciated using a five-year MACRS schedule (see details in the formula sheet) and will be worth nothing at the end of six years. A Plc. can lease the computer with the payments of 150 (pre-paid) for six years. The corporate tax rate is 23 percent and the cost of capital is 8.5 percent.

Compare the NPV of Buy and Lease and make a decision whether the firm should buy or lease the machine.Outline the major reasons for leasing.

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