Your firm is considering leasing a new laser light. The lease lasts for 3 years. The lease calls for 4 before-tax payments of $12,000 per year with the first payment occurring immediately.

The computer would cost $45,000 to buy and would be straight-line depreciated to a zero salvage value over 3 years. The first depreciation will be recorded in year 1. The firm would not want the laser light after three years. The market value is 0 at the end of three years. The firm's WACC is 20%. The firm will take a new loan at an interest rate of 10% to finance the purchase if they decide to own the machinery. First interest payment would start at the end of first year and be paid annually after that.

The corporate tax rate is 40%.

What is the appropriate discount rate for valuing the lease vs owning after-tax CFs?

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

What's the NPV of all after-tax leasing CFs?

What is the CF from depreciation tax savings from owning the machine in year 1?