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$.$ What are the respective present value costs of purchasing the machine or leasing it$?$

$(6$ marks$)$

b$.$ Consider the theoretical cost of Debt, Preference Shares and Ordinary Shares rank them from most expensive to cheapest.

$(6$ marks$)$

c$.$ 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.

$(6$ marks$)$

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

$(5$ marks$)$