COMPANY is a restaurant chain that primarily operates via in-store dining. The COVID19 pandemic has impacted its operations significantly, and COMPANY decided to invest in a project expanding drive-thru booths to service its customers. COMPANY is considering a ten-year lease of the necessary equipment for this drive-thru project which would require a $2,000,000 initial investment. At the end of ten years, the lease would terminate and all the equipment would have to be returned. The project would provide net income of $200,000 each year for the next ten years. Specifically, the estimated sales, variable expenses, and fixed expenses that comprise its annual net income are as follows:

• Sales: $2,000,000
• Variable Expenses: $1,400,000
• Fixed Expenses: $400,000

All of the above items, except for depreciation of $200,000 a year, represent cash flows. The depreciation is included in the fixed expenses. In addition to the change in business operations, the COVID19 pandemic has also significantly impacted the mental and physical health of its employees. COMPANY's utmost priority is the well-being of its workforce. Thus, despite overall lower demand, COMPANY does not intend to layoff anybody. In fact, it has decided to pay out additional employee benefit packages to its front-line employees which will increase salary expenses by $15,000 in the next two years. The company's required rate of return is 12%.

Required:

1. What is the project's net present value?
2. What is the project's internal rate of return?
3. What is the project's payback period?
4. What is the project's simple rate of return?
5. Instead of leasing the necessary equipment for the drive-thru project, COMPANY also has the option to purchase it. Purchasing the equipment would require an initial investment of $2,400,000, but it would decrease annual fixed expenses by $50,000 which comprise cash outflows associated with the lease. After ten years, the equipment would have a salvage value of $400,000. Given this information, what would you suggest COMPANY to do - lease or purchase the equipment for its drive-thru project? Provide a financial analyses based on the net present value in drawing your conclusion. Would your conclusion change if you would consider the internal rate of return instead?What are some additionalqualitativefactors that may impact your decision?