Carmela Leon needs to decide between buying or leasing a computer equipment with a cost of $12.5 million. The equipment would be depreciated straight-line to zero over 5 years. The tax rate is 34%. The annual depreciation tax shield is $0.85 million. The after-tax lease payments are $2 million per year for 5 years. The after tax cost of debt is 5.5%. Given this information the incremental cash flow of buying instead of leasing for year 0 is ______ and for years 1 to 5 is ______.

Select one:

a. $0 million; -$1.32 million

b. $0 million; -$2 million

c. $12.5 million; -$2.85 million

d. -$12.5 million; $2.85 million

e. None of THESE are correct