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Q 4 . WellyWeta workshop is considering buying a machine that costs $ 5 4 5 , 0 0 0 . The machine will be

Q4. WellyWeta workshop is considering buying a machine that costs $545,000. The machine will be
depreciated over five years by the straight-line method and will be worthless at that time. The
company can lease the machine with year-end payments of $140,000. The company can issue bonds
at an interest rate of 7 percent. If the corporate tax rate is 30 percent, should the company buy or
lease? [3 marks]
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