1. The Elsevier Bakery Company has decided to acquire a new equipment at a cost of $72,000. The equipment has an expected life of 6 years and will be depreciated using 5-year MACRS with rates of .20, .32, .192, .1152, .1152, and .0576 (note that 5-year MACRS depreciation actually takes place over 6 years). Acre Leasing Company has offered to lease the equipment to Elsevier Bakery for $13,400 a year for 6 years. Elsevier has a cost of equity of 12.8 percent, a cost of debt of 7.2 percent, and a marginal tax rate of 34 percent. Should Elsevier Bakery lease or buy?

Elsevier Bakery should buy because NPV = $4,834.36

Elsevier Bakery should lease because NPV = $7,420.16

Elsevier Bakery should lease because NPV = $5,205.10

Elsevier Bakery should lease because NPV= $5,316.88

Elsevier Bakery should buy because NPV= -$4,798.44

2. NuParts, Inc., has estimated quarterly sales for next year, starting with Quarter 1, of $15,900, $16,800, $17,500, and $16,400. Purchases are equal to 67 percent of the following quarter's sales and the accounts payable period is 60 days. Assume 30 days in each month. How much will the firm owe its suppliers at the end of Quarter 3?

$7,066.67

$7,506.67

$7,816.67

$6,933.33

$7,325.33