Consider the case of Mitata Company: Mitata Company is considering the purchase of new manufacturing equipment that will cost $35,000 (including shipping & installation). Mitata can take out a 4-year, $35,000 loan to pay for the equipment at an interest rate of 8.40%. The loan and purchase agreements will aslo contain the following provisions:

The annual maintenance expense for the equipment is expected to be $350.

The equipment has a 4-year depreciable life. The Modified Accelerated Cost Recovery System's (MACRS) depreciation rates for a 3-year asset are 33.33%, 44.45%, 14.81%, and 7.41% respectively.

The corporate tax rate for Mitata is 35%.

NOTE: Mitata Company is allowed to take a full-year depreciation tax-saving deduction in the first year.

1. Based on the preceding information, answer the following:

a) What will be the annual loan payment. Choose from the following values: $63,461.12 / $106.62 / $10,661.47 / $12,692.22

b) What will be the annual tax savings from maintenance. Choose from the following values: $123 / $55 / $258/ $135

c) Fill up the following table:

	Year 1	Year 2	Year 3	Year 4
Tax savings from depreciation	$18,375 / $15,068 / $4,083 / $5,513	$4,083 /$5,445 / $12,250 / $18,375	$15,068 / $5,513 / $1,814 / $908	$15,068 / $5,513 / $18,375 / $908
Net cash flow	-$79,533 / $9,544 / $54,082 / -$5,776	-$79,533 / $9,544 / $54,082 / -$4,641	-$8,518 / -$79,533 / $9,544 / $54,082 /	-$9,691 / -$79,533 / $9,544 / $54,082 /

2. Thus, the NPV cost of owning the asset will be: -$51,912 / -$24,747 / -$24,247 / $29,944

3. Mitata Company has been offered an operating lease on the same equipment. The 4-year lease requires end-of-year payments of $1,400, and the firm will have the option to buy the asset in 4 years for $7,700. The firm will want to use the equipment longer than 4 years, so it plans to exercise this option. All maintenance will be provided by the lessor. What is the NPV cost of leasing the asset? -$32,543 / -$11,773 / -$2,457 / -$9,418

4. Should Mitata lease or buy the equipment?

Please select values from the provided options and answer all parts