Purchase versus Lease. Tidewater Hospital, a taxpaying entity, is considering leasing its ambulance fleet.The fleet of ambulances costs

$125,000 and will be depreciated over a ten year life to a salvage value of

$25,000.Tidewater could finance the entire fleet with equal annual debt and principal payments at a before tax cost of debt of 14 percent and an after tax cost of debt at 9 percent for ten years.Alternatively, it could lease the device for ten years.The before tax lease payments are $25,000 per year for ten years.Tidewater’s tax rate is 40 percent.From a financial perspective, should Tidewater lease or borrow the money to buy the ambulances?