GSD brewing company is updating its facilities with the a top of the line 25 bbl automated brewery. In the capital budgeting analysis of this equipment, the IRR of the project was found to be 20% versus the project's required return of 12%. The brewery has an invoice price of $500,000, including delivery and installation charges. The funds needed could be borrowed from the bank through a 4-year amortized loan at a 10.75% interest rate, with payments to be made at the end of each year. In the event that the brewery is purchased, the manufacturer will contract to maintain and service it for a fee of $25,000 per year paid at the end of each year. The loom falls in the MACRS 5-year class(with depreciation rates of 20%, 32%, 19.20%, 11.52%, 11.52%, and 5.76%). GSDs marginal federal-plus-state tax rate is 25%. Innovative Brewing Systems Inc., who produces the brewery, has a leasing program and will lease the equipment to GDS for $140,000 upon delivery and installation (at t=0) plus 4 additional annual lease payments of $140,000 to be made at the ends of Years 1 through 4. The lease agreement includes maintenance and servicing. Due to its advanced technology and detailed construction, Innovative Brewing Systems 25 bbl brewery actually has an 8 year expected life at which time the its salvage value will be zero. However, after 4 years, its market value is expected to equal its book value of $86,400. GSD is planning a major expansion that will triple its capacity in 4 years, so it is not interested in leasing or owning the new brewery after 4 years.

a) What is the NAL, should GSD purchase or lease the new brewery? b) If the lease payments were reduced to $125,000 per year (including the T=0 first payment) what is the NAL, should GSD purchase or lease the brewery?