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Precision Graphics Ltd . ( PGL ) is looking at modernizing its facilities. As part of that process, PGL has decided to acquire new high

Precision Graphics Ltd.(PGL) is looking at modernizing its facilities. As part of that process, PGL has decided to acquire new high-speed colour laser photocopiers. It has the option of buying the machines for $75,000 or leasing them for 5 years. PGL would be able to finance 100% of the purchase with a 5-year, 7% loan. If purchased, PGL would also purchase a 5-year maintenance contract for $880 per year, payable at year-end. Annual lease payments, including maintenance, would cost $18,300. There is not expected to be any residual value at the end of the lease. PGLs tax rate is 28%, and the equipment falls into Class 8 with a 20% CCA rate. 1. Should PGL buy or lease the copiers? find nal. 2. If the copiers had a residual value of $10,000, what difference would that make to the leasing decision? answer #1=1517, #2=-4554

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