1.Finex and Sons is contemplating the financing of a new air conditioning unit. It has the choice of either undertaking a three-year financial lease agreement with the Risk Leasing Company or borrowing for three years and buying. The lease agreement calls for annual end of year payments of $25,000, whereas a loan is available at an interest rate of 10% per annum. Payments at the end of each year. Maintenance costs are estimated to be $2,000 per annum and are paid by the lessor. The unit under consideration has a purchase price of $60,000, which would be depreciated on a prime cost basis, and has no estimated salvage value at the end of three years. Cost of capital 10%. The company's tax is payable at the end of the year of income at a rate of 30%.

Should Finex and Sons lease or borrow?