I am stuck on this problem. Please help!

Summary of Input Data Invoice Price $40,000 Length of loan Loan Interest rate 6% Maintenance expense per year $1,000 Tax Rate 25% Lease Payment per year $10,000 Expected value at the end of fourth year $10,000 MACRS Class 3 year Class Discount rate 4.50% We can now construct our table of incremental cash flows from these two alternatives. Remember, that the appropriate discount rate in this scenario is the after tax cost of borrowing, or: 6% *(1-25%) = 4.5%. MACRS 3-year Depreciation Schedule 2 Depr. Rate (Given) 33% 45% 15% ($13,200) 7% Depr. Exp. NPV LEASE ANALYSIS OF INCREMENTAL CASH FLOWS Year = 2 Cost of buy option Purchase cost ($40,000) Loan proceeds $40,000 loan interest payments Tax savings from interest payments Principal payment Lease payment Tax savings from lease payments Maintenance cost Tax savings from maintenance cost Tax savings from depreciation Salvage value Tax on gain or loss from the disposal of the loom Net cash flows $0 1) Sum of Present Values of All Net Cash Flows Year = Cost of leasing option 0 1 3 4 Purchase cost Loan proceeds loan interest payments Tax savings from interest payments Principal payment Lease payment Tax savings from lease payments Maintenance cost Tax savings from maintenance cost Tax savings from depreciation Salvage value Tax on gain or loss from the disposal of the loom Net cash flows 2) Sum of Present Values of All Net Cash Flows Cost Comparison Net Advantage to Leasing (NAL) [.e., 2)-1 Conclusion: Buy or Leasing