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1. Lease or Buy. Your company want to purchase a new network file server for its wide-area computer network. The server costs $75,000. It will be complete obsolete in three years. Your options are to borrow the money at 10% or to lease the machine. If you lease the payments will be $27,000 per year, payable at the end of each of the next three years. If you buy the server, you can depreciate it straight-line to zero over three years. The tax is 34%. Should you lease or buy?

*Empty table provided (to lay out the relevant cash flows prior to conducting NVP analysis)

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The solution evaluates the lease vs buy decision using NPV analysis

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