QUESTION 1(Continued) Alternative solution NPV=S2300(76500 PVIFA10)-(700PⅤIE10) =-$2300-($7600×3.17($7000k0.62 =-$23T00$24205$44091 4996 NPV is negative. therefore the firm should BORROW AND PURCHASE Another alternative solution Students may choose to calculate separate NPVs for each of the purchase and lease alternatives hase s30000(13500 k P,210)+(s5700PⅥIE10.) =-S30000+(S13500×379)+(S575000.62川 =-$30000+$579$35708 s21313 NPV S6000(s63000PVIF Ao) S630-($6300317 s63000$19910 s26210 Choose to BORROW AND PURCHASE(better off by $49 597)September 2003 QUESTION 1 (Continued) Alternative Solution ( ) ( ) ( ) ( ) - $49596 - $237000- $242505- $44091 - $237000- $76500 3 .1 7 0- $71000 0 .6 2 1 NP V - $237000- $76500 P VIF A0. 10, 4 - $71000 P VIF0. 10, 5 = = =   =   NPV is negative, therefore the firm should BORROW AND PURCHASE. Another Alternative Solution Students may choose to calculate separate NPVs for each of the purchase and lease alternatives. ( ) ( ) ( ) ( ) - $ 2 1 3113 - $ 3 0 0000 $51179 $35708 - $ 3 0 0000 $13500 3 .7 9 1 $57500 0 .6 2 1 NP VPu r c ha s e - $ 3 0 0000 $13500 P VIF A0 . 1 0 , 5 $57500 P VIF0 . 1 0 , 5 = = + + = +  +  = +  +  ( ) ( ) - $ 2 6 2710 - $63000- $ 1 9 9710 - $63000- $63000 3 .1 7 0 NP VLe a s e - $63000- $63000 P VIF A0. 10, 4 = = =  =  Choose to BORROW AND PURCHASE (better off by $49 597)