Admiral Construction Ltd is a privately owned construction company that mainly builds houses and low-rise residential apartment buildings. However, the CEO (who is also the majority shareholder) recently decided to construct a 20-storey high-rise apartment building in the outskirts of Sydney's CBD. This project will require a heavy duty tower crane, costing $1,500,000. Admiral's bank has agreed to lend it the money to purchase the crane, at an interest rate of 5% per annum. However, the crane manufacturer has oered Admiral a ve-year lease contract, involving annual payments of $250,000 at the beginning of each year and a nal residual payment of $750,000 at the end of the fth year, after which Admiral will take ownership of the crane. At that time the crane will have a resale value of around $1,200,000. Since cranes last a long time, the Tax Oce has specied that the crane Admiral intends to use should be depreciated over 20 years. Answer the following questions, given that Admiral's tax rate is 30%.

(a) Calculate the cash ows from leasing a tower crane.

(b) Calculate the cash ows from purchasing a tower crane.

(c) Should Admiral choose to lease or purchase the crane?