Deira Investments is considering investment into Hospital Information System; it has two choices via leasing or buying the software and equipment. The purchase price is AED 420,000 and the machine has a 5-year life. If it buys the machine Deira will need to fund it using capital that costs them 9% per year. Alternatively, the lease payments will be AED 100,250 per year for 5 years with rentals payable at the start of each year.

a- Recently one of your company directors has attended a finance conference, on their return the director has decided the company should fund all projects with internal sources of financing as they are essentially 'free'. Critically discuss if you agree with this statement.

b. Discuss whether the company should raise finance (via any means) if it has a project available with a net present value of BD 10million