Question 53 (10 points)

Truvunet Corporation is upgrading their office equipment including many photocopiers and an enterprise electronic communication system. The system costs $600,000, and must be replaced in five years with no residual value at that time. It falls under Class 8 (CCA Rate 20%). The firm can borrow at 10.5%. The equipment can be leased for $150,000 annually paid at the beginning of each year. The tax rate is 30%.

Required: Answer the following, including variables and calculations to show your work. Is there a net advantage to leasing? What option (lease or buy) should the company pursue? Please show your work and calculations in order to earn full marks. (10 marks)