Barclay Polymers needs to acquire a new extruding machine whose purchase price is $ 600,000. However, the firm could lease the extruder from Primal Leasing Corporation for a 5-year period and make annual payments of $ 115,000 at the beginning of the year. If the extruder is leased , then Primal Leasing Corporation would pay all maintenance costs and Barclay would have the opportunity to purchase the asset for $ 130,000 at the beginning of year 5. If the extruder is purchased by Barclay, then it will be financed with a 5-year loan at an annual rate of 8.75%. Barclay would use the MACRS depreciation method over a 5-year recovery period, would purchase a service contract for $ 8,000 a year, and would keep the extruder after its recovery period. If the firm pursues the purchase alternative, then it would secure a maintenance contract at an expected cost of $ 3,000 annualy, The firm is in a 35% tax bracket.

1- Calculate the annual after-tax cash flow for the leasing alternative.

2- Determine the annual interest and principal payments for the purchase alternative.

3- Determine the annual depreciation deduction for the purchase alternative.

4- Calculate the net present value of both the leasing and the purchase alternatives.