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Best Hospital Bhd considering leasing or purchasing a private jet to transport their surgeons between different hospitals within their operation chain. The hospital is in
Best Hospital Bhd considering leasing or purchasing a private jet to transport their surgeons between different hospitals within their operation chain. The hospital is in the 40 percent tax bracket and its after-tax cost of debt is 7 percent. The estimated after-tax cash flows for the lease and purchase alternatives are given below: End of Year Cash Flow (after Tax) Lease Purchase 1 -64,329 -68454 2 -64,329 -59110 3 -64,329 -63596 4 -64,329 -66633 5 64329 30056 i) Given the above cash outflows for each alternative, calculate the present value of the after-tax cash flows using the after-tax cost of debt (interest) for each alternative. (8 marks) ii) Which alternative do you recommend? Why
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