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March 30, 2017

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Suppose you are studying two hardware lease proposals. Lease Option 1 costs $4,000, but requires that the entire amount be paid in advance. Option 2 costs $5,000, but the payments can be $1,000 now and $1,000 per year for the next four years. If you do NPV analysis assuming a 14% discount rate, which proposal is less expensive? What happens if you use an 8% rate?

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