A Company is considering leasing a new equipment. The lease lasts for 5 years. The lease calls for 5 payments of $41,000 per year with the first payment occurring immediately. The equipment would cost $192,000 to buy and would be straight-line depreciated to a zero salvage value over 5 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 6%. The corporate tax rate is 25%.

a) What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in year 0?

B) What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in year 2?

C) What is the NPV of the lease relative to the purchase?

D) What is the NPV of the lease relative to the purchase if the asset had a pretax salvage value of $4,000 (ignoring any possible risk differences)?