3. Leasing Firm F is a transportation company. It needs new vans. It has two opportunities: either lease or buy. The lease contract is 2 years. The before-tax lease payment is 13,000 per year (claimed at the end of the year) for one van. If firm F leases the vans, it will incur a before-tax operating cost per van of 1000 in year 1 and 1200 in year 2 (claimed at the end of the year). The cost of one van is 25,000. If firm F buys the vans, it will incur a before-tax operating cost per van of 1500 in year 1 and 1700 in year 2 (claimed at the end of the year). The salvage value of one van after 2 years is 10,000. The depreciation amount of one van is 5000 in year 1 and 8000 in year 2 (claimed at the end of the year). The risk-free rate is 5%. The corporate tax rate is 30%. (a) (6 points) Compute the after-tax cash-flow from leasing one van at time 0, 1, and 2 (CF), CF, CF). (b) (6 points) Compute the after-tax cash-flow from buying one van at time 0, 1, and 2 (CF), CF, CF). 12 (c) (4 points) Compute the net present value of leasing one van (NPV). (d) (4 points) Compute the net present value of buying one van (NPV). (e) (2 points) Does firm F choose to buy or lease the vans?