1. Telcom has decided to acquire a new equipment at a cost of $802,000. The equipment has an expected life of 6 years and will be depreciated using 5-year MACRS with rates of .20, .32, .192, .1152, .1152, and .0576 (note that 5-year MACRS depreciation actually takes place over 6 years). There is no actual salvage value. Scotts Investment has offered to lease the equipment to Telcom for $145,000 a year for 6 years, with lease payment at the end of each year. Telcom has a cost of equity of 12 percent, a pre-tax cost of debt of 6 percent, and a marginal tax rate of 25 percent. Should Telcom lease or buy?

   		Telcom should lease because NPV = $55,412.34
   		Telcom should lease because NPV = $63,449.29
   		Telcom should buy because NPV = $69,447.82
   		Telcom should buy because NPV = $45,034.88
   		Telcom should lease because NPV = $42567.43