1. Big Oil is considering whether to lease or purchase an oil rig. The capital budgeting analysis indicating the equipment has not been completed. The equipment has a five-year economic and tax life, and the company uses a straight-line depreciation method (using an expected zero salvage value). The equipment costs $45,000,000 if purchased or it can be leased for five-years at $8,500,000 per year. The first lease payment is payable in advance. The equipments salvage value is estimated to be $5,000,000. Revenue is assumed to be $9,000,000. Given that the firm has a marginal tax rate of 40% and a before-tax cost of borrowing of 10%, determine the net advantage of leasing. Should the firm lease or purchase? 2. If the WACC is used as the discount rate, how will this affect the NAL? No calculation is necessary.