I$2$C Beams Ltd$.,$ a manufacturer of lighted hockey pucks, is negotiating with the Hat Trick Company to purchase or to lease a machine that produces red$-$lighted pucks. The machine would cost $$140,000.$ In five years the machine would have an estimated salvage value of $$35,000.$ Its useful economic life is nine years.

$12$C Beams can borrow funds at $9$ percent from its Playoff Bank and has a tax rate of $25$ percent. The capital cost rate on this machine is $30$ percent, and I$2$C Beam's cost of capital is $14$ percent. Lease payments would be at the beginning of each year, and tax savings would occur at the end of each year. Lease payments would be $$29,000$ over a five$-$year term.

We note that of all the cash flows, the salvage value has the greatest uncertainty. We recognize this by discounting the salvage value at a higher discount rate$-$the cost of capital.

a$-1.$ Calculate PV cost of lease alternative. $($Do not round the intermediate calculations. Round the final answer to nearest whole dollar. Input the answer as positive value.$)$

$PV$ cost $,$$

a$-2.$ Calculate PV cost of borrowing$/$purchase alternative. $($Do not round the intermediate calculations. Round the final answer to nearest whole dollar. Input the answer as positive value.$)$

$PV$ cost $

b$.$ Should I$2$C Beams Ltd$.$ lease or borrow to purchase the machine?

Lease

Borrow$/$Purchase