1. Purchase involves an outlay of $10,000 with straight-line depreciation over 4 years. Leasing involves four annual equal payments of $2,500 starting in year one. Corporate tax rate is 40% and cost of debt is 10%. Which is better, the lease or the purchase?

a. Purchase, saves $2,127.87

b. Leasing, saves $1,750.08

c. Purchase, costs less at $6,534.89

d. Leasing, costs less at $5,197.66