QUESTION THREE (25 Marks) Liverpool Limited urgently needs to upgrade its utility capacity. They require a new generator costing R1 200 000. The generator can be leased or owned and the terms are as follows: Cost of leasing: The lease would require annual end-of-year payments of R320 200 over the four years. Service and insurance costs of R78 500 per annum will be borne by the lessor. The lessee will exercise its option to purchase the asset for R80 000 at the termination of the lease in four years. Cost of owning: The cost could will be settled in cash due to the companies excess cashflows after winning the Premier league in 2023. Liverpool Limited will pay maintenance cost of R6 000 per month. Depreciation charges are based on the straight-line method. At the end of the period the generator will be sold at its residual value of R75 000. Additional Information: the company is in the 28% tax bracket the after-tax cost of the debt is 13% Required: 3.1 Calculate the after-tax cash outflows and the net present value of the cash outflows under each alternative. (22) 3.2 Which alternative would you recommend? Why? (3)