The Blank Button Company is considering the purchase of a new machine for £30,000.The machine is expected to save the ﬁrm £12,500 per year in operating costs over a 5 year period, and can be depreciated on a straight-line basis to a zero salvage value over its life.Alternatively, the ﬁrm can lease the machine for £6,500 per year for 5 years, with the ﬁrst payment due in 1 year.The ﬁrm's tax rate is 34%, and its cost of debt is 10%.Calculate the NPV of the lease versus the purchase decision. Calculate the reservation payment of the lessee.

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The Answer of The Blank Button Company is considering the purchase of a new machine for £30,000.The machine is expected to save the ﬁrm £12,500 per year in operating costs over a 5 year period, and can be depreciated on a straight-line basis to a zero salvage value over its life.Alternatively, the ﬁrm can lease the machine for £6,500 per year for 5 years, with the ﬁrst payment due in 1 year.The ﬁrm's tax rate is 34%, and its cost of debt is 10%.Calculate the NPV of the lease versus the purchase decision. Calculate the reservation payment of the lessee.

The Blank Button Company Is Considering the Purchase of a New