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 years 1 through 5. It can also lease the equipment under a true tax lease for $2.9 million per year for the five years, in which case the lessor will provide necessary maintenance. Assume P&G's tax rate is 30 %, its borrowing cost is 7.5 %, and that the tax deductibility benefit of the lease payments occurs at the same time as when the lease payment is made. (Note: the help file for this question does not make this timing assumption)

a. What is the NPV associated with leasing the equipment versus borrowing and buying it?

The NPV is ? (Round to the nearest dollar.)

b. What is the break-even lease that is, what lease amount could P&G pay each year and be indifferent between leasing and buying through borrowing?

The break-even lease rate is ? (Round to the nearest dollar.)