COL Inc. can either purchase an equipment for $650,000 or lease it from LEN Inc. by making 12 annual lease payments (paid at the beginning of the year) of $89,600. The equipment has CCA rate of 20% and will have salvage value of $56,000 at the end of year 12. Assume this asset is the only asset in the asset class for both companies. LENs borrowing cost is 11% which is 1% lower than COLs. COL and LEN have tax rate of 15% and 40% respectively.

a) Calculate the NPV of leasing for COL.

b) Calculate the NPV of leasing for LEN.

c) Calculate the maximum and minimum annual lease payment acceptable to COL and LEN respectively.