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Your boss asks you to review an option to lease an equipment storage facility that the firm needs. You are to compare it with the

Your boss asks you to review an option to lease an equipment storage facility that the firm needs. You are to compare it with the purchase of the facility. The following information are pertinent to your decision: -The facility will be needed for fifteen years - If the facility is leased, the lessor will conduct all maintenance; if purchased, your firm must conduct maintenance - Facility maintenance is expected to cost $90000 per year -The cost to lease the facility is $600000 per year at the beginning of each year - The purchase price of the facility is $9500000 and the market value at the end of fifteen years is expected to be $8600000 - The before-tax cost of debt is 9%, and the tax rate is 30% - The company's current EBIT is $2250000 (before leasing or purchasing the facility). Assuming that the facility has a twenty-year depreciation life for tax purposes (i.e. it will not be fully depreciated by end of fifteen years), compute the NPV for each option and based on the cost, indicate your decision (round to nearest $1,000). BUY; BUY NPV=-4360000, LEASE NPV -5812000 LEASE; LEASE NPV -4360000, BUY NPV=-5812000 none of them BUY; BUY NPV=-4234000, LEASE NPV=-5938000 LEASE; LEASE NPV=-4234000, BUY NPV=-5938000 OOO

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