Hello, I need help with an attachment that i had pulled from here. It did not provide me with the formulas that were used. I will write out the question, and then can you please provide me with the details of how do I go about calculating the PV for cost of owning vs PV cost of leasing. I understand that the NAL is calculated by taking the PV cost of owning and subtracting it from the PV cost of leasing. However, I cannot figure out the formula that is used to calculate the PV cost of owning and PV cost of leasing. Can you please help me out. The assignment is due in few hours. I would really appreciate the help. Thank you

Problem:

Big sky hospital plans to obtain a new MRI that costs $1.5 million and has an estimated four year useful life. It can be obtained a bank loan for the entire amount and buy the MRI, or it can obtain a guideline lease for the equipment. Assume that the following facts apply to the decision:

-The MRI falls into the three year class for tax depreciation, so the MACRS allowances are .33, .45, .15, and .07 in year 1 through 4 respectively.

-Estimated maintenance expenses are $75,000 payable at the beginning of each year whether the MRI is leased or purchased.

-The Big Sky's marginal tax rate is 40 percent.

-The bank loan would have an interest rate of 15 percent.

-If leased, the lease payments would be $400,000 payable at the end of each of the next four years.

-The estimated residual (and salvage) value is $250,000.

a. what is the NAL and IRR of the lease? Interpret each value.

b. Assume now that the salvage value estimate is $300,000, but all other facts remain the same. What is the new NAL ? and the new IRR?