Your company is considering either purchasing or leasing an asset that costs \($1,000,000.\) The asset, if purchased, will be depreciated on a straight-line basis over six years to a zero residual value. A leasing company is willing to lease the asset for

\($300,000\) per year; the first payment on the lease is due at the time the lease is undertaken (i.e., year 0), and the remaining five payments are due at the beginning of years 1–5. Your company has a tax rate t_C = 40 percent and can borrow at 10 percent from its bank.

a. Should your company lease or purchase the asset?

b. What is the maximum lease payment it will agree to pay?