Scenario: Lease vs. Buy Decision

Company I is considering leasing a piece of equipment for $10,000 per year for 5 years or buying it for $40,000. The equipment has a useful life of 5 years and no salvage value. The company's cost of capital is 12%.

Requirements:

1. Calculate the Net Present Value (NPV) of leasing the equipment.
2. Compute the NPV of buying the equipment.
3. Determine which option is more cost-effective.
4. Assess the impact if the cost of capital decreases to 10%.