Question 3 (25 marks) Read the following scenario and answer the questions that follow:

Wireless Technologies (Pty) Ltd, is a South African telecommunications services provider that is looking to expand its 5G network coverage across the country. The company is considering whether to install its own telecommunications towers or lease them out from a prominent tower-sharing company, The Tower Company (Pty) Ltd. Leasing out 100 towers would involve a payment of R30 million per year for five years. Lease payments are payable annually in advance. Constructing 100 new towers would cost R135 million, including the cost of equipment and installation. If the company decides to construct its own towers, it will need to obtain a long-term secured loan of R135 million. Preliminary discussions with its bank indicate that an interest rate of 9% per annum will be applicable. Owning a tower has some associated maintenance costs (for example, security, power and fuel) of R15 000 per annum per tower and insurance costs of R12 000 per annum per tower. The company will also pay rent of R6 000 per month per tower to the owners on whose land the towers will be built. The towers can be sold for their book value at the end of the fifth year. The companys tax rate is 28%, while its long-term weighted average cost of debt is 10%. The towers will be depreciated on a straight-line basis over ten years.

Required: Determine whether the company should erect its own towers or lease them out.