tion McMillan plans to acquire equipment with a four year life that cost $8,000,000, delivered and installed. McMillan can borrow the required $8,000,000 using a 12% loan to be amortized over four years. Alternatively, McMillan can lease the equipment for four years at a rental charge of $3,500,000 per year payable at the end of each year. The lessor will own the asset at the expiration of the lease. The equipment will definitely be used for 4 years, at which time its estimated net salvage value will be $560,000. McMillan plans to continue using the equipment beyond year 4, so (A) If he purchases the equipment, he will keep it and (B) If he leases the equipment the company will exercise an option to buy it at its estimated net salvage value of $560,000. The lease contract stipulates that the lessor will maintain the equipment. However, If McMillan borrows and buys the equipment he will have to bear the cost of maintenance which is $400,000 payable at the end of the year. The equipment falls in the MACRS-5 year class life and the tax rate is 40%. The MACRS 5 year class rates for a 4 year property are 0.20, 0.32, 0.19, and 0.12 in years 1-4 respectively. Calculate the Net advantage to Leasing and state your decision?(25 marks)