Manama Investments is considering investment into Hospital Information System, it has two choices via leasing or buying the software and equipment.

The purchase price is AED$550,000$ and the machine has a$5-$yearlife. If it buys the machine Manama will need to fund it using capital that costs them $8\%$ per year. Manama estimates maintenance of the system will be AED $25,000$ per annum.

Alternatively, the lease payments will be AED $140,000$ per year for $5$ years with rentals payable at the start of each year.

a$.$ What are the respective present value costs of purchasing the machine or leasing it$?$

$(6$ marks$)$

b$.$ Consider the theoretical cost of Debt, Preference Shares and Ordinary Shares rank them from most expensive to cheapest. $(6$ marks$)$

c$.$ Recently one of your company directors has attended a finance conference, on their return the director has decided the company should fund all projects with internal sources of financing as they are essentially $$free$.$ Critically discuss if you agree with this statement. $(6$ marks$)$

d$.$ Discuss whether the company should raise finance $($via any means$)$ if it has a project available with a net present value of BD $10$million