e: 3 of 3 Question 7 Cherry Picking 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 from the local leasing store with annual lease payments, payable at the Beginning of each of the year of $9,500 (5 years in the time horizon for the analysis) At an alternative, the owner has approached his bank to enquire about a loan to purchase the cheery picking machine. The cost of the machine is 551,000, it has an economic life of 8 years and at the end of 5 years, the market (salvage) value is estimated to be $20,000. The bank has informed him that they would charge 9% per year (payable annually at the End of each year) The equipment has a CCA rate of 25%. The benefit of any tax shields is realized at the end of each year. The company's tax rate is 30%. Exotic Mango Farm's cost of capital is 14% Required Complete the following table Leasing alternative Present value of the lease alternative Discount rate used Borrow to purchase alternative Present value of the borrow to purchase alternative Which alternative would you choose? Why would you choose that alternative? At ED . D