High electricity costs have made Farmer corporation's chicken$-$plucking machine

economically worthless. Only two machines are avallable to replace it$.$ The International

Plucking Machine $($IPM$)$ model is avallable only on a lease basis. The lease payments will

be $$100,000$ for five years, due at the beginning of each year. This machine will save

Farmer $$39,000$ per year through reductions in electricity costs. As an alternative,

Farmer can purchase a more energy$-$efficlent machine from Basic Machine Corporation

$($BMC$)$ for $$465,000.$ This machine will save $$42,000$ per year in electricity costs. A local

bank has offered to finance the machine with a $$465,000$ loan. The interest rate on the

loan will be $9$ percent on the remaining balance and will require five annual principal

payments of $$93,000.$ Farmer has a target debt$-$to$-$asset ratio of $57$ percent and a tax

rate of $25$ percent. After five years, both machines will be worthless. The machines will

be depreclated on a straight$-$line basis.

a$.$ What is the NAL of leasing? $($Do not round Intermedlate calculations and round your

answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

b$.$ How much debt is displaced by this lease? $($Do not round Intermedlate calculations

and round your answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$