Q5. (16 Points) Imagine that you are the CFO of a startup. You are wondering whether to buy or lease office furniture. If you buy the furniture, it will cost you

$133,000 today. Alternatively, you can lease the furniture from the leasing firm of your friend, Mr. James Grey. The annual leasing payment is $25,000 (paid at the end of the year). The economic life (and the leasing period) of the furniture is seven years. The leasing firm's tax rate is 28% and its pre-tax cost of debt is 6.80% pa. Your firm's tax rate is 25%. a. (10 Points) If your startup's pre-tax cost of debt is 7.20% pa, does this deal work for both of you? Please prove your point with your (NPV) work. b. (6 Point) Now let's assume that your startup's pre-tax cost of debt is 8.00% pa. Does this deal work for both of you now? Please prove your point with your (NPV) work./n