Worked Example Lasernet Ltd needs to acquire advanced security monitoring equipment costing R500 000 to expand their facilities in order to be more competitive. The equipment can be purchased or leased. The after-tax cost of the debt is 7% and the company is in the 30% tax bracket. The terms of the lease and purchase plans are as follows: Lease The leasing agreement would require annual end-of-year payments of R96 700 over the five years. The lessee will exercise its option to purchase the equipment for R33 400 at the termination of the lease. Purchase The cost could be financed with a five year, 15% loan, requiring equal annual payments of R119 326. The company will pay R12 000 per year for a service contract that covers all costs. The straight-line method of depreciation is used. The company plans to keep the machine beyond its five-year recovery period. The interest payments for the respective five years are R60 000; R51 100; R40 868; R29 090 and R15 500 Required: a. Determine the after-tax cash outflows and the net present value of the cash outflows under each alternative (round off to the nearest rand) (23)