You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $2,000,000, and it would be depreciated straight- line to zero over four years. Because of radiation contamination, it will actually be completely valueless in four years. You can lease it for $600,000 per year for four years. 1. Lease or Buy: Assume that the tax rate is 35 percent. You can borrow at 8 percent before taxes. Should you lease or buy? 2. Leasing Cash Flows: What are the cash flows from the lease from the lessor's viewpoint? Assume a 35 percent tax bracket. 3. Finding the Break-Even Payment: What would the lease payment have to be for both lessor and lessee to be indifferent about the lease? 4. Taxes and Leasing Cash Flows: Assume that your company does not contemplate paying taxes for the next several years. What are the cash flows from leasing in this case? 5. Setting the Lease Payment: In the previous question, over what range of lease payments will the lease be profitable for both parties? 6. MACRS Depreciation and Leasing: Rework Problem 1 assuming that the scanner will be depreciated as three-year property under MACRS (see Chapter 10 for the depreciation allowances)