(b) Trower considers acquiring three new delivery vehicles for business expansion. With the new delivery vehicles, Trower expects to increase the revenue of the company by $100,000 per year. A lessor-Suissee Corp. has offered to lease delivery vehicles to Trower for an annual lease payment of $20,000 per vehicle, payable in advance at the start of each year. Maintenance cost, to be met by Trower, would be $1,200 per vehicle per year. The leasing company would responsible for the annual insurance payment of $1,500 per vehicle per year. Each vehicle would be leased for five years. If Trower choose to purchase its own delivery vehicles, it would pay all insurance and maintenance cost itself. Each vehicle would cost $80,000 with a down payment of 20%. The remaining could be financed by a five-year loan, which has been offered by ANZ Bank at an annual interest rate of 10%. It was depreciated over a 7-year period using the straight-line method, with an expected residual value of $10,000. Trower expects to sell each vehicle for $5,000 at the end of year five. Total maintenance cost and annual insurance payments are $3,600 and $4,500 per year, respectively. Both costs are tax deductible expenses. Trower has a 30% marginal tax rate. By using the WACC in question 1(a), recommend whether Trower should lease or buy delivery vehicles. (17 marks) (b) Trower considers acquiring three new delivery vehicles for business expansion. With the new delivery vehicles, Trower expects to increase the revenue of the company by $100,000 per year. A lessor-Suissee Corp. has offered to lease delivery vehicles to Trower for an annual lease payment of $20,000 per vehicle, payable in advance at the start of each year. Maintenance cost, to be met by Trower, would be $1,200 per vehicle per year. The leasing company would responsible for the annual insurance payment of $1,500 per vehicle per year. Each vehicle would be leased for five years. If Trower choose to purchase its own delivery vehicles, it would pay all insurance and maintenance cost itself. Each vehicle would cost $80,000 with a down payment of 20%. The remaining could be financed by a five-year loan, which has been offered by ANZ Bank at an annual interest rate of 10%. It was depreciated over a 7-year period using the straight-line method, with an expected residual value of $10,000. Trower expects to sell each vehicle for $5,000 at the end of year five. Total maintenance cost and annual insurance payments are $3,600 and $4,500 per year, respectively. Both costs are tax deductible expenses. Trower has a 30% marginal tax rate. By using the WACC in question 1(a), recommend whether Trower should lease or buy delivery vehicles. (17 marks)