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Lease versus purchase Northwest Lumber Company neods to expand its faciltes. To do so, the frmm must acqure a machine costing $160,000. The machine can be leased or purchased. The firm is in the 2536 tax bracket, and is aftertax cont of debt is 12 . . The lermi of the lease and purchase plans are as follows. Lease The leasing armangernent requres end-ofyear payments of $46,300 over five years. Al mainsenance costs wil be paid by the lessor, irsurance and otter coats will be berre by the iersee. The lessee will exercise its option to purchase the asset lor \$28t,000 at temmination of the lease. lynore aty Alure tax benefit associatsd with the purchase of the equigment at the end of year 5 . under the lense option: Purchase If the firm purchases the machine, its cost of $160,000 wil be financed wth a five-yea, 16% loan roqairng equal end ofyear paymucts of 346 , 666. . The machine wil be deorociated under MACRS using a 5-year recovery penod. (See Sor the applicabie depreciation percertiget.) The fimm will pay \$1,000 peryear for a service contract that covers all mantanance coets; insurance and other costs wil be bome by the fime. The frm plars to keep the equipenent and use it beyond its five-year tecovey period a. Defermine the affor-tax cash outflows of Nothwest Lumber under each allemasive b. Find the present value of each stream, using the aftertax coet of debt c. Which altemative loase or purchase-would you recortunens? a. The athor-tax eash outflow associated with the lease in years 1 through 4 is 4 (Round to the nearest dollac)