Exercise 2 Wild Pet, Inc., a Pets's food and supplement firm, is considering the acquisition of a new "Cats Croquette" processing machine. Wild Pet can purchase the machine through the use of its normal financing mix (35% debt and 65% common equity) or lease it. Pertinent details follow: Acquisition price of the machine Useful life Salvage value Depreciation method Annual cash savings before tax and depreciation from the machine Rate of interest on a four-year installment loan Marginal tax rate Annual rentals (four-year lease) Annual operating expenses included in the lease Cost of capital a) Calculate the NPV. b) Calculate the NAL. c) Should the company lease or buy the machine? $45,000 4 years $5,000 Straight-line $16,000 12% 40% $13,000 $1,750 14%