Cash flows ($) Machine Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 A -100000 10000 30000 40000 20000 20000 B -100000 10000 40000 50000 10000 20000 a) Based on the payback rule, which Machine should the company buy? b) Based on the net present value, which Machine should the company buy? (Assume the k is 4% ). For the $100000 investment, the company has two plans: Plan A: use $40000 from the company and borrow $60000 from the bank to buy the machine. The borrowed money will be paid annually back to the bank (Equal loan payment) with an annual interest of 7% in 5 years. The maintenance is $5000 for each year paid by the company. Plan b lease the machine from the supplier with an annual payment of $25000 for first three year and purchase the machine at the end of year 3 for $40000. The maintenance fee for the first three year is paid by the supplier and for the last two years is $6000 annually paid by the company. The tax rate is 40% aand the ddepriciation is a straight line ( same amount every year ) and the machine worth nothing to the company after year 5. The value decreases with a rate of 4% (k) annually. C) for the buying options how much should the company pay back to the bank each year? And what is the tax saving for the year 2?

D) for the leasing options, what is the NPV For the next 2's activities?