Time line of cash flow and application of the time value of money. Mauer Mining Company leases a special drill press with annual payments of $150,000. The contract calls for rent payments at the beginning of each year for a minimum of six years. Mauer Mining can buy a similar drill for $750,000, but it will need to borrow the funds at 8%.

1. Show the two choices on a time line with the cash flow.

2. Determine the present value of the lease payments at 8%.

3. Should Mauer Mining lease or buy this drill?