B G I M 6.75% 25 1 (3.26) 19.04) 2 (3.37) (8.93) 3 (3.49) (8.82) 4 (3.60) (8.70) 5 (3.72) (8.58) 6 (3.85) (8.45) 7 (3.98) (8.32) 8 (4.11) (8.19) 9 (4.25) (8.05) 10 (4.40) (7.91) 11 (4.55) (7.76) 12 (4.70) (7.60) 13 (4.86) (7.45) 14 (5.02) (7.28) 15 (5.19) (7.11) 16 (5.37) (6.94) 17 (5.55) (6.76) 18 (5.73) (6.57) 19 (5.93) (6.38) 20 (6.13) (6.18) Calculate PV of borrow and buy option. Also, don't forget that in this case the company can sell equipment at the end of the 25th year (residual value) which will be cash inflow. All 1 numbers in mln.$. Perods 1-40 are half-years 2 Discount rate (yearly) 3 Useful life of equipment 4 5 6 Time Period 7 Principal repayment 8 Interest expense 9 Total cash flows 10 Discounted flows 11 12 13 Time Period 14 Principal repayment 15 Interest expense 16 Total cash flows 17 Discounted flows 18 19 20 Time Period 21 Principal repayment 22 Interest expense 23 Total cash flows 24 Discounted flows 25 26 27 Time Period 28 Principal repayment 29 Interest expense 30 Total cash flows 31 Discounted flows 32 33 34 Time Period 35 Residual value 36 Total cash flows 37 Discounted flows 38 39 PV of Borrow-and-Buy Alternative (total) 40 21 (6.33) (5.971 22 (6.55) (5.75) 23 (6.77) (5.53) 24 (7.00) (5.31) 25 (7.23) (5.07) 26 (7.48) 27 (7.73) (4.57) 28 (7.99) (4.31) 29 (8.26) (4.04) 30 (8.54) (3.76) (4.83) 31 (8.83) (3.48) 32 19.13) (3.18) 33 19.43) (2.87) 34 (9.75) (2.55) 35 (10.08) (2.22) 36 (10.42) (1.88) 37 (10.77) (1.53) 38 (11.14) (1.17) 39 (11.51) (0.79) 40 (11.90) (0.40) 41 42 43 44 45 46 47 48 49 50 40.19 40.19