FurnCo Ltd is a manufacturer of office furniture. The company is required to invest in used tooling equipment at a cost of R5m. A finance company that specialises in the leasing of such equipment has offered either a 3year lease requiring annual payments of R2 080000 per year payable in-advance, or a loan which is repayable in a single repayment at the end of 3 years. The leasing option includes servicing and maintenance with a value of R150 000 per year payable in arrears. The tax rate is 28%. Tax on the lease instalments is deductible one year after the payment and they take place at the beginning of each year. If the company takes the loan, the company will be required to pay for servicing and maintenance costs. The residual value is expected to be R 2m in 3 years' time. The cost of capital is 14% ar the before tax cost of debt is 13,50% The company is able to depreciate the cost of tooling equipment on a straight-line basis over 3 years. To acquire the office furniture at the end of the lease, the lessee is required to make a residual value of 30%. Required: 2