QUESTION THREE [25] Sully Limited urgently needs to upgrade its utility capacity. They require a new generator costing R120 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 R39 200 over the four years. Service and insurance costs of R10 000 per annum will be borne by the lessee. Sully Limited will purchase the asset for R15 000 at the termination of the lease in four years. Cost of owning: The cost could be financed with XYZ Financers Limited. It would require a four-year 16% loan, with annual year-end payments of R42 890 . Sully Limited will pay maintenance cost of R9 000 per annum. 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 R20 000 Interest payments included in the year-end payments are R19 200; R15 410; R10 020; and R5 920 respectively. Additional Information: - the company is in the 30% tax bracket - the after-tax cost of the debt is 11% Required: 3.1 Calculate the after-tax cash outflows and the net present value of the cash outflows under each alternative. 3.2 Which alternative would you recommend? Why