Please, do not round in between or intermediate calculations. Once the entire calculation is complete only round to the nearest whole number. Also, the majority of the attempts on Chegg for this question are incorrect. Kindly, please follow the instructions given in the question. Thanks!

Orwell Futures has decided to acquire a travelling machine. Its cost is $75,000. In five years it can be salvaged for $25,000. Friendly Loansharks has agreed to advance funds for the entire purchase price at 9 percent per annum payable in equal instalments at the end of each year over the five years.

As an alternative, the machine could be leased over the five years from the manufacturer, Ageless Ventures, with annual lease payments of $15,800 payable at the beginning of each year.

Orwell Futures tax rate is 25 percent. Its cost of capital is 15 percent, and its tax shields are realized at the end of the year. Travelling machines have a CCA rate of 30 percent. If the machine is owned, annual maintenance costs will be $750.

a-1. Calculate PV cost of lease alternative. (Do not round the intermediate calculations. Round the final answer to the nearest whole dollar. Input the answer as a positive value.)

PV cost $

a-2. Calculate PV cost of borrowing/ purchase alternative. (Do not round the intermediate calculations. Round the final answer to the nearest whole dollar. Input the answer as a positive value.)

PV cost $

b. Should Orwell Futures lease or buy its machine?

• Lease

• Borrow/Purchase