Assume zero taxes. Equipment can be leased at $10,000 per year (first payment one year hence) for ten years or purchased at a cost of $64,177. The company has a weighted average cost of capital of 15 percent.A bank has indicated that it would be willing to make the loan of $64,177 at a cost of 10 percent.

Should the company buy or lease? There are no uncertainties. The equipment will be used for ten years. There is zero salvage value.