The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $2.6 million in annual pre-tax cost savings. The system costs $8.4 million and will be depreciated at a CCA rate of 20 percent over five years. Wildcats tax rate is 34 percent, and the firm can borrow at 9 percent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $1,950,000 per year. (Do not round intermediate calculations. Round the final answers to 2 decimal places. Enter the answers in dollars.)

a. What is the NPV of leasing for Wildcat?

NAL $

b. What is the maximum lease payment that would be acceptable to the company? Maximum lease payment $