Suppose that National Waferonics has before it a proposal for a four-year financial lease.

Year 0: Lease cash flow +62,200

Year 1: Lease cash flow -27000

Year 2: Lease cash flow -22,400

Year 3: Lease cash flow -17,800

These flows reflect the cost of the machine, depreciation tax shields, and the after-tax lease payments. Ignore salvage value. Assume the firm could borrow at 14% and faces a 30% marginal tax rate.

1) What is the value of the equivalent loan?

2) What is the value of the lease?