Your company $($BEB$)$ is considering leasing solid oxide fuel cells that produce electricity on$-$site.

You and your team need to perform analysis to support the decision$-$making process. The lease lasts for $12$ years. The lease calls for $13$ payments of $$15,000$ per year with the first payment occurring immediately. The fuel cells would cost $$90,350$ to buy and would be straight$-$line depreciated to zero salvage over $12$ years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of $7\mathrm{.}5\%.$ The corporate tax rate is $36\%.$

$1.$ What is the after$-$tax cash flow from leasing relative to the after$-$tax cash flow from

purchasing in years $1-12?$

$2.$ What is the after$-$tax cash flow from leasing relative to the after$-$tax cash flow from

purchasing in year $0?$

$3.$ What is the NPV of the lease relative to the purchase?

$4.$ What would the after$-$tax cash flow in year $12$ be if the asset had a residual value of

$$5,000($ignoring any possible risk differences$)?$

$5.$ What is your recommendation?