Dakota Trucking Company (DTC) is evaluating a potential lease for a truck with a 4-year life that costs $40,000.

If the firm borrows and buys the truck, the loan rate would be 10%. The truck will be used for 4 years, at the end of which time it will be sold at an estimated residual value of $10,000. If DTC buys the truck, it would purchase a maintenance contract that costs $1,000 per year, payable at the end of each year.

The lease terms call for a $10,000 lease payment (4 payments total) at the beginning of each year. DTC's tax rate is 40%. Should the firm lease or buy? (Note: Use straight line deprecation to 0 for 4 years)