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"You're overlooking a few things," replied Coleman. "For one thing, the treasurer's office says that we could only afford to put $350,000 down if we buy the property, and then we would have to pay the other $500,000 off over four years at $175,000 a year. So, there would be some interest involved on the purchase side that you haven't figured in." "But that little bit of interest is nothing compared with over two million bucks for leasing," said Watkins. "Also, if we lease, I understand we would have to put up an $8,000 security deposit that we wouldn't get back until the end. And besides that, we would still have to pay all the yearly repairs and maintenance costs just like we owned the property. No wonder those insurance companies are so rich if they can swing deals like this." "Well, I'll admit that I don't have all the figures sorted out yet," replied Coleman. "But I do have the operating cost breakdown for the building, which includes $7,500 annually for property taxes, 8,000 for insurance, and $4,500 for repairs and maintenance. If we lease, Beneficial will handle its own insurance costs, and of course the owner will have to pay the property taxes. I'll put all this together and see if leasing makes any sense with our required rate of return of 16%. The president wants a presentation and recommendation in the executive committee meeting tomorrow. Let's see. Development said the first lease payment would be due now and the remaining ones due in years 1 to 17. Development also said that this store should generate a net cash inflow that's well above average for our stores." Required: 1. Using the NPV approach, determine whether Top-Quality Stores Inc. should lease or buy the new facility. 2. What is your recommendation that you would make to the President of Top-Quality Stores Inc., Ms. Basmadjii?? Do this analysis using either a Business Report or Memorandum including supporting calculations but also include a cover letter stating Assignment Name: Company Name; Group member names; Date of the report

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