Rabat Investments is considering investment into Hospital Information System, it has two

choices via leasing or buying the software and equipment.

The purchase price is AED $640,000$ and the machine has a $6-$year life. If it buys the

machine Rabat will need to fund it using capital that costs them $10\%$ per year. Rabat estimates

maintenance of the system will be AED $35,000$ per annum.

Alternatively, the lease payments will be AED $145,250$ per year for $6$ years with rentals payable at the

start of each year.

a$.$ What are the respective present value costs of purchasing the machine or leasing it$?$