Sanders Limited is considering whether to lease its equipment as an alternative to borrowing to purchase it. The equipment will cost $180,000.This amount can be borrowed from a local bank at 6% interest with annual payments amortized over 4 years. Payments would be at the end of the year. The CCA rate on this equipment would be 30%, and the expected salvage at the end of 4 years is $25,000.

Alternatively, lease payments of $55,000 could be made each year for 4 years, with the first payment due immediately.

Sanders' cost of capital is 11%, and its tax rate is 30%.

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