Your company wants to purchase a new wax pouring machine for your candle-making business. The machine costs $240,000. It will be obsolete in three years with zero salvage value. Your options are: 1. To borrow & buy the machine at an interest rate on debt of 10%, or, 2. Lease the machine. If you lease, the lease payments are $90,000 per year, payable at the beginning of each year. If you buy the sequencer, you will use a CCA rate of 30%, calculated using the Accelerated Investment Incentive Method, and the asset pool will remain open after the machine becomes obsolete. The tax rate is 30%, Time Period 0 1 2 3 Initial Cost $240,000 Lease Payments Lease Tax Shield CCA Tax Shield Terminal Loss Tax Shield Salvage Value Annual Cash Flows PV of Annual Cash Flows Net Advantage to Leasing What is the after-tax cost of debt that you should use for computing the PV of the lease? 010% 07% 06% 08% 09% If you buy the machine, what is the PV of the tax shield from CCA? The PV of the tax shield from CCA IS $60,288 OThe PV of the tax shield from CCA IS $67.758 The PV of the tax shield from CCA is S56 469 ONone of the above are correct What is the Net Advantage to Leasing (NAL) for the Lessee? The NAL IS-S2,153 The NALS -51.666 The NALiS +5245 The NALB 5245 None of the above are correct None of the above are correct Based on your analysis above, what action should the company take? OThey should lease the asset Othey should buy the asset OThe company is indifferent between leasing and buying In general, which of the following statements are correct with respect to leasing? OLeasing is most advantageous when the Lessee has a low tax rate and the Lessor has a high tax rate Cleasing is most advantageous when the Lessee has a high tax rate and the Lessor has a low tax rate The true value of leasing arises due to the fact that leases do NOT have to appear on the Balance Sheet of the Lessee (if it is an Operating Lease) All of the above are true COnly a) and c) are true