Alpha Manufacturing $($Pty$)$ is considering acquiring new specialised equipment to improve its production efficiency. The company can either pirchaspurchase the equipment or lease it from a reputable supplier.

The purchase price of R$1,200,000$ can be financed over five years by Home Bank with an annual loan repayment of R$341,000.$ The interest payable at the end of each year is as follows: R$156,000,$ R$131,950,$ R$104,774,$ R$74,064,$ and R$39,362.$

The annual maintenance and insurance costs are expected to be R$19,000$ and R$80,000,$ respectively.

The depreciation policy for Alpha is $20$ percent on the reducing balance method.

The equipment will be dolsold sat book value at the end of $5$ years.

The lease option offers payments of R$280,000($payable at year end$)$ over $5$ years.

The annual service and insurance amount to R$20,000$ and R$100,000$ respectively. The former is borne by the lessee while the latter, by the lessor.

The lessee had an option to purchase the equipment for R$120,000$ at the termination of the lease.

Alpha Manufacturing $($Pty$)$ Ltd enjoysenjoyed a tax rate of $27$ percent and an after$-$ tax cost of debt of $11$ percent.

Required:

Calculate the after$-$tax cash outflows and the net present value of cash flows under each option.

NB: show all workings clearly. Round all amounts to the nearest rand and apply the relevant tax and discount factors consistently.

Recommend which alternative is more cost$-$effective and explain your reasoning