Use the following information on the various borrowing and leasing alternatives for an item that is commonly acquired for a business. Calculate the Net Present Value for each method of acquiring this item to determine which would be best. In each case, assume an increase in the firm's annual income of $85,000 if this item is acquired. (You can analyze your options by using the new income in your calculation if you choose, but the correct choice can be determined without using this information.) Use a Discount rate =10% when making your analysis. Assume tax rate of 28% with all options. Which option should this business use to acquire this item? Cash Analysis: NPV= Debt Financing: NPV = Financial Lease: NPV = Chosen Option: Options: \#1: Cash Purchase: Purchase price =$300,000 \#2: Debt Financing - Purchase price =$300,000 - Cost of capital =5% - $30,000 down payment, 270,000 loan repaid in 6 equal annual payments of $53,194.72 - Complete the following amortization schedule to determine the amount of interest that the business would pay in each year. Remember that interest is a tax deduction. \#3: Financial Lease - 6 Annual lease payments of $55,000 made at the beginning of each year. Remember that the full amount of the lease payment is a tax deduction. - At the end of the 6 year term of the lease, the firm will make a final payment of $10,000 and acquire ownership of the equipment from the lessor. Use Straight Line depreciation / 6 year life / Salvage Value=\$0 - Remember that depreciation is a tax deduction Annual Depreciation =