Wolfsan Corporation has decided to purchase a new machine that cost $4.2 million. The machine will be depreciated on a straight-line basis and will be worthless after four years. The corporate tax rate is 35%. The Sur Bank has offered Wolfsan a four year loan for $4.2 million. The repayment schedule is four yearly principal repayments of $1.05 million and interest charge of 9 % on the outstanding balance of the loan. Both principal repayments and interest are due at the end of each year. Carl Leasing Corporation offers to lease the same machine to Wolfsan. Lease payments of $1.2 million per year are due at the beginning of each of the four years of the lease. (can use excel and attach your workings and can show the final results here)

a. Based on the NAL of the lease should Wolfsan buy or lease the machine? (5 points)

b. What is the annual lease payments that will make Wolfson indifferent to whether it lease the machine or purchases it? (3 points)

c. When would it be advantages for Wolfsan to enter into a fractional ownership arrangement rather than buying or leasing the Airplane? (no numerical calculations required) (2 points)

This is a practice question specific to aircraft leasing, I hope someone is able to help with this, if you use excel please explain the equations/functions you used in order to get your answer in addition to the spreadsheet screenshots if possible. Thank you in advance!