The equipment costs $1,000,000, and, if it were purchased, Lewis could obtain a term loan for the full purchase price at a 10 percent interest rate. Although the equipment has a six-year useful life, it is classified as a special-purpose computer, so it falls into the MACRS three-year class. If the system were purchased, a four-year maintenance contract could be obtained at a cost of $20,000 per year, payable at the beginning of each year. The equipment would be sold after four years, and the best estimate of its residual value at that time is $200,000. However, since real-time display system technology is changing rapidly, the actual residual value is uncertain.

As an alternative to the borrow-and-buy plan, the equipment manufacturer informed Lewis that Consolidated Leasing would be willing to write a four-year guideline lease on the equipment, including maintenance, for payments of $260,000 at the beginning of each year. Lewis's marginal federal-plus-state tax rate is 40 percent. You have been asked to analyze the lease-versus-purchase decision, and in the process to answer the following questions:

QUESTION:. Answer these questions one at a time to see the effect of the change on NAL. That is, starting
with the original numbers you used for questions a. and b., what is the NAL if:
- interest rate increases to 12 percent
- the tax rate falls to 34 percent
- maintenance cost increases to $25,000 per year
- residual value falls to $150,000
- the system price increases to $1,050,000

***** PLEASE SHOW WORK IN EXCEL WITH FORMULAS***** Present value of owning: $591,741.46 Present value of leasing: $572,989.86