Your company (BEB) is considering leasing solid oxide fuel cells that produce electricity on-site. You and your team need to perform analysis to support the decision-making process. The lease lasts for 12 years. The lease calls for 13 payments of $15,000 per year with the first payment occurring immediately. The fuel cells would cost $90,350 to buy and would be straight-line depreciated to zero salvage over 12 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 7.5%. The corporate tax rate is 36%.

What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in years 1-12?

What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in year 0?

What would the after-tax cash flow in year 12 be if the asset had a residual value of $5,000 (ignoring any possible risk differences)?