Prichard's Closets is considering using a specialized high-tech equipment for its space exploration program. It will either lease or buy it, and is now trying to decide what's better.

• The equipment costs $8,000,000, and it would be depreciated straight-line to zero over 10 years. It will be completely valueless after that time.
• The firm can lease the equipment for the same number of years for $1,000,000 per year, paid at the end of each year.
• Prichard's Closets is in 20% tax rate bracket.
• Prichard's Closets can borrow at 6% annual rate before taxes.

Answer the following questions:

(a) The annual depreciation of the equipment is ____________$.

(b) The annual tax savings from depreciation (i.e., the tax shield) is ___________$.

(c) The annual after-tax lease payment is ________________$.

(d) The discount rate to be used for the leasing-versus-buying decision is ____________%.

(e) Year 0 Prichard's Closets incremental cash flow from leasing-rather-than-buying is _______________ $.

(f) Year 1, 2, ..., final year Prichard's Closets incremental annual cash flow from leasing-rather-than-buying is _____________$.

(g) Prichard's Closets net advantage to leasing (i.e., the net present value of leasing rather than buying) is ______________$.

These additional questions below don't require any calculations, and are more general:

(h) In general, if Prichard's Closets net present value of leasing rather than buying is positive, then in order for Prichard's Closets to be indifferent between leasing and buying the lease payment would need to go _________. (up or down)

(i) In general, if Prichard's Closets net present value of leasing rather than buying is positive, then Prichard's Closets should ___________ (lease or buy) the equipment.

(j) In general, if Prichard's Closets net present value of leasing rather than buying is positive, then the company leasing the equipment to Prichard's Closets should want to sign such lease agreement with Prichard's Closets. This statement is ____________ . (True or False)