With favorable growth prospect, Bien Company requires to add new machinery. The machine would cost $500,000 if purchased; It would be depreciated straight-line to zero salvage over 5 years. Alternatively, it may be leased for $110,000/yr. The firms borrowing cost of is 7%, and its tax rate is 40%

1. List the leasing cash flows for year 0 and year 1 5.

2. What is the net advantage to leasing (NAL)?

3. What decision should be made regarding lease or buy?