$16,000 Borrow/Purchase Asset Tax Shield = = || || | || Payment @ Year 10% int + Maintenance - 1 $6,434 + $1,800 2 $6,434 + $1,800 $6,434 + $1,800 Depreciation Year 3 year MACRS 123 X 0.33 X 0.45 X 0.15 || || || Amortization Schedule After Tax Cost Present Value @7% int Year Amount Int. Rate = Int. Paid 1 $16,000 10% X = Payment $6,434 Principal Balance 23 Total Tax Tax Year 1 + ++ Depreciation + Interest + Maintenance = Deduction x 23 + + || || || || Rate = Shield X 40% X 40% + X 40% Lease Asset After Taxes Present Value @7% int Year $16,000 60% 1 $5,750 2 $5,750 3 $5,750 Buy it for $5,000 What should the company do borrow/purchase or lease?