BackWater Brewery (BWB) is currently leasing its brewing and bottling facility. It is costing BWB $7 million per year to lease the facility.

BWB is looking to purchase its own facility and see if they can save on leasing costs. The costs to purchase a new brewing/bottling facility is expected to be $25 million and BWB expects the facility to last 20 years. Maintenance costs on the facility would be $2 million per year. They expect the facility will sell for $5 million at the end of 20 years.

BWB cost of capital is 14% and its corporate tax rate is 35%

1. What is the Net Present Value of leasing the bottling facility for 20 years? (2 marks)
2. What are the cash flows associated with the purchase? (2 marks)
3. What is the Net Present Value of the purchase (Ignore CCA) (3 marks)