Please type the answer by computer, so i can see it clearly, thank you!!!!

(ML) Mila Limited is debating whether to rent or buy a piece of machinery. These choices require the following information:

Buy: The purchase price of the machine is $4 million. The machine would be straight-line depreciated to a zero salvage value over 4 years. The residual value is expected to be zero.

Lease: The annual lease payments requested by Michal Leasing Inc. (the lessor) would be $1 million, payable at the end of each of the 4 years of the lease.

Additional information: Both firms pay a 35 percent corporate tax rate, ML has a 25 percent cost of equity, a 10 percent cost of secured debt, and a 17 percent WACC. The cost of secured debt for Michal Leasing Inc. is 6%.

Questions:

1(a) Does the fact that the lessor and lessee have different borrowing rates affect the calculation of the NAL? Briefly explain your answer.

1(b) Would such lease be classified as capital or an operating lease? Briefly explain.

1(c) Identify the relevant incremental after-tax cash flows from leasing over purchasing in years 0- 4. Neatly present and label ALL relevant incremental after-tax cash flows in a table.