E) Life of the option 11) If your firm purchases a machine costing $2 million, it would depreciate that machine straight-line to zero over four years, after which time the machine would be worthless. Your firm has a tax rate of 23 percent and borrows funds at 6 percent before taxes. Your firm is also considering leasing this machine. How much would the lease payment have to be in order for both the lessor and your firm to be indifferent about leasing? A) $552,200 B) $563,333 C) $521,909 D) $576,693 E) $601,316 12) You are considering a project that has been assigned a discount rate of 14.3 percent. If you start the project today, you will incur an initial cost of $11,400 and will receive cash inflows of $6,800 a year for two years. If you wait one year to start the project, the initial cost will rise to $12,100 and the cash flows will increase to $7,200 a year for two years. What is the value of the option to wait? A) -$28.51 B) -$30.49 C)-$33.02 D) -$7.63 E) -$9.46