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A firm is considering the purchase of a new equipment costing $4,229,840 which qualifies for a 23% CCA rate. This equipment has a 4-year life

A firm is considering the purchase of a new equipment costing $4,229,840 which qualifies for a 23% CCA rate. This equipment has a 4-year life after which it will be worthless. The firm can lease it for $1,285,730 per year for its useful life. Assume that the firm makes payments at the end of the year, the asset pool remains open, the tax rate is 25%, and the pre-tax cost of borrowing is 6.58%. What would the lease payment have to be for both the lessor and lessee to be indifferent to the lease?

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