An old photocopy machine of your company will be replaced with a new one, because it cannot be repaired. A new machine will cost $20,000. Your company can borrow funds at 12% compounded quarterly over 2 years. Alternatively, it can arrange lease finance comprising 8 payments of $3,000 starting immediately. No residual value is built into the contract. Suppose that the marginal corporate tax rate is 30% (tax payments are due quarterly with one quarter delay).

Calculate whether your company should buy or lease the photocopy machine.