Net Advantage from Leasing

This question has seven parts.

Terra Enterprises is trying to determine whether leasing would be a better alternative than purchasing $2.5 million of new equipment.

The equipment has a six-year life after which it can be sold for $75,000. The equipment belongs in a 30% CCA class and can be leased for $500,000 per year, payable at the beginning of each year. The firm can borrow money at 8% and has a 38% tax rate.

1. What is the after-tax cost of debt for the lessee?
2. What is the amount of the annual after-tax lease payment to the lessee?
3. What is the present value of the CCA tax shield?
4. What is the present value of the after-tax lease payments?
5. What is the net advantage to leasing amount from the perspective of the lessee?
6. What is the net advantage from leasing from the lessor's point of view, assuming that the lessor's marginal tax rate is 38%?
7. What amount would the lease payment have to be for both the lessor and the lessee to be indifferent to the lease?