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  1. business
  2. accounting
  3. 2.nova corp. is considering the purchase of a $300

2.Nova Corp. is considering the purchase of a $300,000 machine that has a 5 year...

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Accounting

2.Nova Corp. is considering the purchase of a $300,000 machine that has a 5 year life
with no salvage value. The asset will generate after-tax cash flows of $98,000 per year
and the company has a marginal tax rate of 40%. The company has a required rate of
return of 12%. The machine has a CCA rate of 30%. Alternatively, the company can
also lease the machine with lease payments of $90,000 per year (beginning of the year)
for 5 years and the before tax cost of borrowing in the lease is 9%.(15 points)
A. If the company buys the machine, what is the NPV?(6 points)
B. If the company leases the machine, what is the NAL? (8 points)
C. Should the company buy or lease? (1 point)2

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