Emerson Corp. is trying to decide whether to lease or purchase a piece of equipment needed for the next five years. The equipment would cost $502,000 to purchase, and maintenance costs would be $20,700 per year. After five years, Emerson estimates it could sell the equipment for $100,800. If Emerson leases the equipment, it would pay $152,000 each year, which would include all maintenance costs. Emerson’s hurdle rate is 15%.

a. What is the net present value of the cost of purchasing the equipment?

b. What is the net present value of the cost of leasing the equipment?