The WOC company has to decide between buying or leasing equipment that will save 1.1 million dollars in annual costs, the equipment costs 7 million dollars and will depreciate in a straight line to zero in 5 years, the company's tax rate is 34% and can get a loan at 9% Lambert Leasing company can lease the equipment at a cost of 1.65 million dollars per year, company policy is to require payments at the beginning of the year.

a) What is the net advantage of leasing for the WOC company, if the equipment has no salvage value?

b) What is the maximum lease payment acceptable to the company?

c) Assume that the equipment will have an after-tax salvage value of $700,000 at the end of the lease, what is now the maximum payment of

lease for WOC?

d) Is it convenient for the lessee to lease the equipment?