Suppose Proctor & Gamble (P&G) is considering purchasing $ 10 million in new manufacturing equipment. If it purchases the equipment, it will depreciate it for tax purposes on a straight-line basis over five years, after which the equipment will be worthless. It will also be responsible for maintenance expenses of $ 1.00 million per year paid in each of the years 1 through 5. It can also lease the equipment under a true tax lease for $2.6 million per year for the five years, in which case the lessor will provide necessary maintenance. Assume P&G's tax rate is 30 % and its borrowing cost is 7.0 %

a. What is the NPV associated with leasing the equipment versus financing it with the lease-equivalent loan?

b. What is the break-even lease rate longthat is, what lease amount could P&G pay each year and be indifferent between leasing and financing a purchase?