1. Corp P is making a decision whether to buy or lease a piece of equipment. Using the following information find the present cost of leasing and buying and make a recommendation.

Equipment cost = $1,000,000 3 year MACRS life 3 year economic life

Cost of debt = 12% Maintenance cost per year $50,000 paid at beginning of year

Tax Rate = 25% Salvage equipment at end of 3^rd year for $60,000

or

Corp P could lease for $350,000 per year for three years - paid at beginning of year.