James Tucker, a financial analyst at Industrious Corporation, is analyzing the possibility of leasing a new Sun Enterprise 10000 server, which is needed for the expansion plans of the data center. The systems manager responsible for the purchase has provided a quote from Sun Microsystems for $927,000 if the hardware is purchased. The system must be delivered by 03/15/2002 and installed on 03/22/2002. Tucker receives proposals from two leasing companies: one for 24 months and one for 36 months. He is also able to find out that the companies use equity insertion rates of 10 percent and 5 percent, as well as financing rates of 8 percent and 8.5 percent, respectively.

• What is the amount of the two- and three-year equity insertion for the leasing companies (in USD)?

• Which lease is preferable for Industrious Corporation, assuming there are no cash flow problems and the company wants the lowest total cost?

• What would the lease payments be in advance (paid at the beginning of the month) for the two- and three-year leases?

• What would be the two- and three-year lease payments in arrears (paid at the end of the month)?

• What are the two- and three-year lease rate factors?

• How would the lease payments in advance change if the acquisition cost of $927,000 included $50,000 in software and installation?