QUESTION 3 Thumbing through Uber's interim financial report, Dara Khosrowshahi (Chief Executive Officer) wonders what actions the company could take to soften the US$17-22 million loss anticipated for the first quarter of 2020. A figure in the report which caught him by surprise is the increasing usage of dockless e-bike and e-scooter services - people seem to have ditched ride-hailing services for e-bikes and scooters as social distancing is enforced during the Covid-19 pandemic! Uber has been developing dockless e-bike and e-scooter services in several cities and Dara noticed that this business line has become one of Uber's largest investments in property and equipment assets. With a purchase price of $1.15 billion, Dara wonders if leasing dockless e-bikes and e-scooters would be a better option for Uber given the anticipated first-quarter loss in 2020. Tax rules state that the salvage value for these assets is equivalent to 7% of the purchase price, and the allowable annual depreciation charge is 25% reducing balance. Dockless e-bikes and e-scooters have a life of five years and are expected to generate an annual before-tax cash flow of $480 million. Dara recalls details of a recent proposal by Nelson Chai (Chief Financial Officer) for Uber to lease e-bikes and e- scooters. If the lease is in advance, Uber will make five annual payments of $250 million at the beginning of each year and a residual payment of $200 million at the end of the lease term. Uber's company tax rate is 34% and it has a cost of debt of 10% per annum. Assuming that the investment has a positive NPV (and therefore Uber will undertake it), should Uber purchase or lease the e-bikes and e- scooters