9. Lease valuation using formulas. BigCo is considering leasing equipment that requires for $155,000 a year, payable in advance. The cost of the equipment is $900,000, has a CCA rate of 25% and will last for 6 years. The expected scrap value is $150,000. Assume that the 1^st CCA tax deduction would be taken at the end of the 1^st year. BigCo have lots of other equipment in the asset pool. The tax rate is 30% and the cost of debt is 7%. (L02, L03).

a) Should BigCo lease or buy the equipment?

b) What is the maximum lease payment that would make BigCo indifferent between leasing or buying

Please show all calculations