You have the option of leasing an asset for $100,000 per year, with payments to be made at the end of each year of use. This lease cannot be canceled. Alternatively, you may buy the asset for $248,700. For reimbursement purposes, the lease must be capitalized. If the asset is purchased, it will be debt-financed with $210,000 of 3-year serial notes (that is, $70,000 of principal will be repaid each year). The effective interest rate on this loan will be 8%.

Assume that the asset has an allowable useful life of 3 years with no estimated salvage value.

■ Determine the amount of expense that would be reported during each of the 3 years under the two financing plans.

■ Assuming that 80% of all reported capital expenses are reimbursed and that the discount rate is 6%, determine the present value of the asset in these two methods of financing.