The XYZ Company seeks to acquire the use of a rolling machine at the lowest possible cost . The choice is either to lease one at Rs. 50,000 annually…

The XYZ Company seeks to acquire the use of a rolling machine at the lowest possible cost. The choice is either to lease one at Rs. 50,000 annually or to purchase one for Rs. 150,000. The company's cost of debt is 10 percent and its tax rate is 40 percent. The machine has an economic life of 4 years and no salvage value. The company uses straight-line depreciation. The discount rate applied is the after tax cost of debt.

a. What is present value of leasing?

b. What is present value of cost of purchasing?

 c. Should the Machine be leased or purchased?