Financial Option 2: Lease of $25 Million in Equipment Rationale for investment: The businesss current equipment is efficient, but it uses a substantial amount of electricity. Operating the production line also creates significant waste material, including waste plastics. The business is looking into leasing newer, more environmentally friendly equipment that will still allow it to be at least as efficient in production as it is now. Assumptions to consider: Annual cash flows generated with equipment: $4 million Discount rate is 12% 15-year useful life No salvage value

Equipment Initial Investment Annual Cash Inflows Discount Rate Number of Years Salvage Value $25,000,000 $4,000,000 12% 15 Year 1 2 3 4 5 6 7 8 9 10 Cash Flows $4,000,000 $4,000,000 $4,000,000 $4,000,000 $4,000,000 $4,000,000 $4,000,000 $4,000,000 $4,000,000 $4,000,000 Year 11 12 13 14 15 16 17 18 19 20 Cash Flows $4,000,000 $4,000,000 $4,000,000 $4,000,000 $4,000,000 $0 $0 $0 $0 $0 NPV = $2,243,458 $ ves