Problem 13-22 Net Present Value Analysis of a Lease or Buy Decision [L01] Blinko Products wants an airplane for use by its corporate staff. The airplane that the company wishes to acquire, a Zephyr ll, can be either purchased or leased from the manufacturer. The company has made the following evaluation ofthe two alternatives: Purchase alternative. If the Zephyr ll is purchased, then the costs incurred by the company would be as follows: 850.000 Purchase cost of the plane Annual cost of servicing, licenses, and taxes 9,000 Repairs 3,000 First three years, per year Fourth year 5,000 Fifth year 10,000 The plane would be sold after five years. Based on current resale values, the company would be able to sell it for about one-half of its original cost at the end of the five-year period. Lease alternative. If the Zephyr II is leased, then the company would have to make an immediate deposit of $50,000 to cover any damage during use. The lease would run for five years, at the end of which time the deposit would be refunded. The lease would require an annual rental payment of $200,000 (the first payment is due at the end of Year 1). As part of this lease cost, the manufacturer would provide all servicing and repairs license the plane, and pay all taxes. At the end of the five-year period, the plane would revert to the manufacturer, as owner Blinko Products' required rate of return is 18%. (lgnore income taxes.) Click here to view Exhibit 13B-1and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables