Morris-Meyer Mining Company must install $1.5million of new machinery in its Nevada mine. It can obtain a bank loan for 100 percent of the required amount. Alternatively, a Nevada investment banking firm that represents a group of investors believes that it can arrange for a lease financing plan. Assume that the following facts apply: 1. The equipment falls in the MACRS 3-year class. 2. If it borrows to purchase, then the estimated maintenance expenses are $75,000 per year payable at the end of each year. 3. Morris-Meyer's federal-plus-state tax rate is 40 percent. 4. If the money is borrowed, the bank loan will be at a rate of 15 percent, amortized in 4 equal installments to be paid at the end of each year. 5. The tentative lease terms call for beginning of year payments of $400,000 per year for 4 years. (This lease includes maintenance) 6. Morris-Meyer will use the equipment for 4 years at the end of which time it will be sold. The best estimate of this market value is $250,000. 7. (Note: MACRS rates for Years 1 to 4 are 0.33.0.45.0.15 and 0.07) What is the net advantage to leasing? (25 marks)