Problem 3 (Lease versus Purchase) Assume that Lewis Securities plans to acquire some new equipment having a 4-year useful life, with option to purchase the equipment at end of this contract. If the equipment is leased Lewis could obtain a 4-year lease with annual lease rental of $30,000, payable at the beginning of each year. This rental payment includes maintenance and insurance expenses. Lewis have the option to purchase the equipment at the end of the lease contract for $5,000. If purchase via borrowing Equipment cost = $100,000 Interest rate on bank loan = 10% Tax-rate 40% Depreciation: MARCRS, 3-year asset class with rates of 33%, 45%, 15%, 7% If company purchases via borrowing. 4-year maintenance contract costs $5,000 payable at end of each year. Must purchase Insurance (for the equipment) with annual premium of $1,500 payable at beginning of each year