J. Appleseed Ltd. is considering whether to borrow funds to purchase a machine for apple 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 next seven years of $9,000. (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 apple picking machine. The cost of the machine is $55,000 and, at the end of seven years, the market (salvage) value is estimated to be $10,000. The bank has informed him that they would charge 8 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 20 percent. J. Appleseed Ltd.'s cost of capital is 15 percent. 5 [8] 3 7 Required: 8 Complete the following table and use the space below to support your answels. 9 10 Leasing alternative: 11 Present value of the lease alternative: 12 Discount rate used: 13 Borrow-to-purchase alternative: 14 Present value of borrow-to-purchase: 15 16 17 Which alternative would you choose? -8 Why would you choose that alternative? 9