SpaceXplorer 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.
• SpaceXplorer is in 20% tax rate bracket.
• SpaceXplorer can borrow at 6% annual rate before taxes.

Answer the following questions:

(a) The annual depreciation of the equipment is $_______ Round to whole dollar.

(b) The annual tax savings from depreciation (i.e., the tax shield) is $________ Round to whole dollar.

(c) The annual after-tax lease payment is $________ Round to whole dollar.

(d) The discount rate to be used for the leasing-versus-buying decision is %________ Round to TWO decimal places. Put in %, not in decimals.

(e) Year 0 SpaceXplorer 's incremental cash flow from leasing-rather-than-buying is $_________Round to whole dollar. If negative, don't forget the minus sign!

(f) Year 1, 2, ..., final year SpaceXplorer 's incremental annual cash flow from leasing-rather-than-buying is $_______Round to whole dollar. If negative, don't forget the minus sign!

(g) SpaceXplorer 's net advantage to leasing (i.e., the net present value of leasing rather than buying) is $________ Round to whole dollar. If negative, don't forget the minus sign!

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

(h) In general, if SpaceXplorer's net present value of leasing rather than buying is positive, then in order for SpaceXplorer to be indifferent between leasing and buying the lease payment would need to go ______ Type UP or DOWN.

(i) In general, if SpaceXplorer's net present value of leasing rather than buying is positive, then SpaceXplorer should _________(type LEASE or BUY) the equipment.

(j) In general, if SpaceXplorer's net present value of leasing rather than buying is positive, then the company leasing the equipment to SpaceXplorer should want to sign such lease agreement with SpaceXplorer. This statement is _________(Type TRUE or FALSE.)