How to find NPV in lease and buy case analysis. Daiwan Semiconductor Manufacturing Company Limited $($the $$Client$),$ together with its

subsidiaries, manufactures, packages, tests, and sells integrated circuits and other

semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan, the United

States, and internationally. It provides complementary metal oxide silicon wafer fabrication

processes to manufacture logic, mixed$-$signal, radio frequency, and embedded memory

semiconductors.

Daiwan Semi has engaged your company to consult and advise on a planned asset acquisition.

The Client has a large backlog of customer orders among their automotive clients, in part due to

chip shortages. Therefore, Daiwan needs to acquire a new machine used to lay silicon wafers

onto computer processor chips in an effort to deliver finished product in a more timely fashion.

There are $2$ suppliers that could supply the new machinery that Daiwan needs: Howard Picard

and Marcosoft. Each manufacturer offers both financing and leasing alternatives for each of

their respective equipment offerings.

Daiwan Semi$$s CEO, Dr$.$ Wei, is an electrical engineer. He is a technological master but has

limited understanding of finance. You will be presenting your results directly to him. Therefore,

points are awarded for summarizing and simplifying your conclusions in a way that is suitable for

your audience.

Using the case facts outlined below and the methods used in class, your task is to determine

which of the options below you would recommend.

$1.$ Lease from Howard Picard

$2.$ Purchase from Howard Picard $($using debt financing$)$

$3.$ Lease from Macrosoft

$4.$ Purchase from Macrosoft $($using debt financing$)$

Your Excel file should show your work which demonstrates the rationale for your conclusions.

Please be sure to include a brief rationale supporting your conclusions. Making reference to

specific metrics is highly recommended.

Daiwan Semi$-$Conductors

$$ Uses a discount rate of $15\%$ for assessing all new investments of this type.

$$ Is subject to an income tax rate of $25\%$ Howard Picard $-$ The sale price, aka acquisition cost for the equipment is $$125,000.$

A$.$ The Lease from Howard Picard

i$.$ Has a duration of $5$ years

ii$.$ Has an annual lease payment of $$30,000($before tax$)$

iii. Requires no Down Payment $($no initial investment$)$

B$.$ The Financing Option from Howard Picard

i$.$ Requires no down payment, i$.$e$.$ it is financed $100\%$ through debt, at $8\%$ an

annual interest rate, with annual principal and interest payments. The loan will

be repaid in full in $5$ years $(5$ total end$-$of$-$year payments$).$

ii$.$ The useful life of the asset is $5$ years, i$.$e$.$ after $5$ years it has no remaining value.

iii. CCA $($depreciation for tax purposes$)$ is an equal $$25,000$ for each of the $5$ years

of the asset$$s useful life.

Macrosoft$$s equipment costs $$150,000.$

A$.$ The Lease from Macrosoft

i$.$ Has a duration of $5$ years

ii$.$ Has an annual lease payment of $$36,000($before tax$)$

iii. Requires no Down Payment $($no initial investment$)$

B$.$ The Financing Option from Macrosoft

i$.$ Requires a $$15,000$ down$-$payment, i$.$e$.$ it is financed $90\%$ through debt, at a

$7\mathrm{.}5\%$ annual interest, with annual principal and interest payments. The loan will

be repaid in full in $5$ years $(5$ total end$-$of$-$year payments$).$

ii$.$ The useful life of the asset is $5$ years, i$.$e$.$ after $5$ years it has no remaining value.

iii. CCA $($depreciation for tax purposes$)$ is an equal $$30,000$ for each of the $5$ years

of the asset$$s useful life.

$*$HINT $$ If you have organized your HP analysis well, then considering the MSFT alternative can

be a very quick activity by creating a copy of your sheet and changing the relevant

assumptions$/$inputs$.$

$**$You should have NO HARD$-$CODED cells, aside from input data; the key facts of the case given

herein