$\{15$ points$\}$ Daiwan Semiconductors Company needs to replace an old machine used to lay silicon wafers onto

computer processor chips sold to their automotive clients. Daiwan has the option to lease or to buy this new

piece of equipment.

Using the case facts outlined below and the method used in class, your task is to determine which alternative

you would choose, whether to lease or buy.

Within your Excel sheet you should create a new tab to perform your analysis. Be sure to perform any analysis

required to support your answer. Be sure to state your conclusion.

A$.$ The Firm:

i$.$ Uses a discount rate of $15\%$ for assessing all new investments

ii$.$ Is subject to an income tax rate of $15\mathrm{.}5\%$

B$.$ The Lease

i$.$ Has a duration of $10$ years

ii$.$ Has an annual lease payment of $$15,000($before tax$)$

C$.$ The Financing Option

i$.$ The cost of the asset is $$125,000$

ii$.$ The useful life of the asset is $10$ years, i$.$e$.$ after $10$ years it has no remaining value.

iii. CCA $($depreciation for tax purposes$)$ is an equal $$12,500$ for each of the $10$ years of the

asset's useful life.

iv$.$ The asset purchase will be financed in full with debt. The debt will carry a rate of

interest of $6\%$ per annum, will have equal annual payments $($at the end of each year$)$ and

will be repaid in full by the end of year $10.$