# Problem 18-4 ” TUTOR CAN YOU PLEASE PLACE RESULTS ON A EXCEL SPREADSHEET, THANK YOU” Lease versus Buy Big Sky Mining Company must install \$1.5…

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Problem 18-4 ” TUTOR CAN YOU PLEASE PLACE RESULTS ON A EXCEL SPREADSHEET, THANK YOU” Lease versus BuyBig Sky Mining Company must install \$1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply:1. The machinery falls into the MACRS 3-year class.2. Under either the lease or the purchase, Big Sky must pay for insurance, property taxes, and maintenance.3.The firm’s tax rate is 40%.4.The loan would have an interest rate of 13%.5.The lease terms call for \$400,000 payments at the end of each of the next 4 years.6.Big Sky Mining has no use for the machine beyond the expiration of the lease, and the machine has an estimated residual value of \$250,000 at the end of the 4th year.A) What is the present value cost of ownership? Round your answer to the nearest cent.\$________ B) What is the present value cost of leasing? Round your answer to the nearest cent.\$________ C) What is the NAL of the lease? Round your answer to the nearest cent.\$________

Cost of owingYearAfter tax loan paymentsDepreciation tax savingResiual valueTax on residualNet cash flowsPV cost of owning 0 1-\$135,000.00\$198,000.00 2-\$135,000.00\$270,000.00 3…

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