PB&J Limited currently spends 213,333 a year leasing office space in Leeds, UK. Because lease payments are tax deductible at a 28 per cent corporate tax rate, the firm spends about 153,600 per year (213,333(1-0.28)] on an after-tax basis to lease the building. The firm has no debt, and has an equity beta of 2. Assuming an expected market return of 12 per cent and a risk-free rate of 6 per cent, its CAPM-based cost of capital is 18 per cent. Suppose that PB&J has the opportunity to buy its office space for 1 million. The office building is a relatively risk-free investment. The firm can finance 100 per cent of the purchase with tax-deductible mortgage payments. The mortgage rate is only slightly higher than the risk-free rate. How does PB&J determine whether to buy the building or continue to lease it? (10 marks) PB&J Limited currently spends 213,333 a year leasing office space in Leeds, UK. Because lease payments are tax deductible at a 28 per cent corporate tax rate, the firm spends about 153,600 per year (213,333(1-0.28)] on an after-tax basis to lease the building. The firm has no debt, and has an equity beta of 2. Assuming an expected market return of 12 per cent and a risk-free rate of 6 per cent, its CAPM-based cost of capital is 18 per cent. Suppose that PB&J has the opportunity to buy its office space for 1 million. The office building is a relatively risk-free investment. The firm can finance 100 per cent of the purchase with tax-deductible mortgage payments. The mortgage rate is only slightly higher than the risk-free rate. How does PB&J determine whether to buy the building or continue to lease it? (10 marks)