Cherry Pickings Farms Inc. is considering whether to borrow funds to purchase a machine for cherry picking or lease the asset under an operating lease arrangement. The lease would be f the local leasing store with annual lease payments, payable at the beginning of each of the ne seven years of $$8,500.($Seven years is the time horizon for the analysis.$)$

As an alternative, the owner has approached his bank to enquire about a loan to purchase the cherry picking machine. The cost of the machine is $$54,000$ and, at the end of seven years, the market $($salvage$)$ value is estimated to be $$15,000.$ The bank has informed him that they would charge $9$ percent per year $($payable annually, at the end of each year$).$

The equipment has a CCA rate of $25$ percent. The benefits of any tax shields are realized at the end of each year. The company's tax rate is $30$ percent. Cherry Pickings Farms Inc.$\text{'}$s cost of capital is $15$ percent. Required:

Gather the key facts and compute the followings:

A$.$ Phesent value of borrow$-$to$-$purchase

B$.$ Present value of the lease alternative

C$.$ Which alternative would you choose?

D$.$ Why would you choose that alternative?