SA SA INTERNATIONAL HOLDING LIMITED Sa Sa International Holding Limited (the "Company"), stock code 0178, is a listed co pany in the Hong Kong Stock Exchange Market. The Company is engaged in wholesai and retail of cosmetic products. Assume the directors., Dr. Simon Kwok and Dr. Eleanor Law, have decided to expanc its business and have liaised with the vendor, Ray Equipment, for a quotation. Ray Equipment has agreed to sell the equipment at a price of HK$3.8 million, at three-year MACRS depreciation. At the end of year four, the market value of the equipment is expected to be HKS250,000. Alternatively, the Company can lease the equipment from Ben Equipment Leasing. The lease agreement requires the lessee (the Company) to make four annual payments of HKS990,000, due at the beginning of each year; and the deposit of HK$200,000 will only be returned to the Company at the end of the lease term. The Company may issue bonds with the 11.5 percent yield rate, and the tax rate is 17 percent Questions 1. Would you suggest the Company to purchase or lease the equipment? 2. Ben, CEO of Ben Equipment Leasing, offers a purchase option to the Company to pur- chase the equipment at the fair market value at the end of the lease term. How would the inclusion of the purchase option affect the value of the lease