questions 1 & 2 please.

c. Tum MPUTERS AT WARF COMPUTE and distribution of the venture, the company te the keyboard. Because any needs specialized to Mini Case THE DECISION TO LEASE OR BUY AT WA e equipment. Clapton Aco equipment at a price he equipment falls in the market value of the coun On N and infor ufac Warf Computers has decided to proceed with the manufacture and keyboard (VK) the company has developed. To undertake this Venta obtain equipment for the production of the microphone for the be required sensitivity of the microphone and its small size, the company ment for production. Nick Warf, the company president, has found a vendor for the equin tical Equipment has offered to sell Warf Computers the necessary equin $6.1 million. Because of the rapid development of new technology, the equi three-year MACRS depreciation class. At the end of four years, the market ment is expected to be $ 780,000. Alternatively, the company can lease the equipment from Hendrix Lad contract calls for four annual payments of $1.48 million, due at the begin Additionally, Warf Computers must make a security deposit of $400,000 that when the lease expires. Warf Computers can issue bonds with a yield of one company has a marginal tax rate of 21 percent. tive Chi drix Leasing. The le e beginning of the yeu 000 that will be returned YO a vield of 9 percent and the 1. Should Warf buy or lease the equipment? 2. Nick mentions to James Hendrix, the president of Hendrix Leasing, that although the company will need the equipment for four years, he would like a lease contract for two years instead. At the end of the two years, the lease could be renewed. Nick also would like to eliminate the security deposit, but he would be willing to increase the lease payments to $1.875 million for each of the two years. When the lease is renewed in two years, Hendrix would consider the increased lease payments in the first two years when calculating the terms of the renewal. The equipment is expected to have a market value of $3.2 million in two years. What is the NAL of the lease contract unuci u terms why might Nick prefer this lease? What are the potential ethical issues Con the new lease terms? 3. In the leasing discussion James inform an