Leasing: Break-Even Lease Payment Answer to Question B below

Suppose Proctor & Gamble (P&G) is considering purchasing $16 million in new manufacturing equipment. If it purchases the equipment, it will depreciate it for tax purposes on a straight-line basis over five years, after which the equipment will be worthless. It will also be responsible for maintenance expenses year, paid in each of years 1 through 5. It can also lease the equipment under a true tax lease for $4.3 million per year for the five years, in which case the lessor will provide necessary maintenance. Assume P&G's tax rate is 30% and its borrowing cost is 7.0%. a. What is the NPV associated with leasing the equipment versus financing it with the lease-equivalent loan? b. What is the break-even lease rate that is, what lease amount could P&G pay each year and be indifferent between leasing and financing a purchase? of $1.00 million per a. What is the NPV associated with leasing the equipment versus financing it with the lease-equivalent loan? The NPV is $ 888642 (Round to the nearest dollar.) b. What is the break-even lease rate that is, what lease amount could P&G pay each year and be indifferent between leasing and financing a purchase? The break-even lease rate is $ Round to the nearest dollar.)