Oswald Spinning has decided to acquire a piece of equipment but has not yet decided to buy or lease. The lease payments would be Rs.1,40,105 paid annually at the end of each year. If purchased at a cost of Rs.4,00,000, the equipment would be financed with debt costing 10%, which can be repaid at any time within the four year period. The life of the equipment is four years. The lease is a firm commitment to make four payments.

There is no salvage value. Should the firm lease or buy-borrow? There are no taxes.