XYZ Corporation has decided to acquire a machine with purchased price of $150,000 (plus $3,000 for delivery) This equipment has a high risk of obsolescence. XYZ Corporation has two options: to buy or to lease this machine. XYZ Company has a 35% marginal tax rate. If purchased, the machine would be a class 10 with a CCA rate of 30%. The salvaged value is expected to be $12,000 at the end of 6 years. XYZ Company will be entitled to an investment tax credit from federal government of $5,000 (at year 0 ). The provincial government will provide an investment tax credit of $500 per year for the duration of project (Note: The provincial government tax credit is a before tax benefit). XYZ Company will incur the pre-tax cost associated with maintenance and insurance of $2,000 per year. These operating costs are incurred at the end of the year. These expenses would not be incurred if the machine is leased. To finance the purchase, XYZ Company could borrow at an annual pre-tax rate interest rate of 10% over a period of 6 years, with annual payments at the end of the year. Loan will include several restrictions, such as a limit on dividends and bonus payments for XYZ and a requirement for collateral. XYZ Company weighted average cost of capital is 10%.The lease rate would be $35,000 per year for 6 years, payable at the beginning of each year, while operating cash flows and the tax shield due to the lease payment will occur at the end of each year. Under this lease contract, XYZ company will be restricted of usage of this equipment to 2,500 hours per month (XYZ will have to pay penalty for over limit the usage of equipment). Question 25 (13 points) What alternatives, leasing or buying, should be chosen, according to the equivalent loan amount approach? Provide all calculations. XYZ Corporation has decided to acquire a machine with purchased price of $150,000 (plus $3,000 for delivery) This equipment has a high risk of obsolescence. XYZ Corporation has two options: to buy or to lease this machine. XYZ Company has a 35% marginal tax rate. If purchased, the machine would be a class 10 with a CCA rate of 30%. The salvaged value is expected to be $12,000 at the end of 6 years. XYZ Company will be entitled to an investment tax credit from federal government of $5,000 (at year 0 ). The provincial government will provide an investment tax credit of $500 per year for the duration of project (Note: The provincial government tax credit is a before tax benefit). XYZ Company will incur the pre-tax cost associated with maintenance and insurance of $2,000 per year. These operating costs are incurred at the end of the year. These expenses would not be incurred if the machine is leased. To finance the purchase, XYZ Company could borrow at an annual pre-tax rate interest rate of 10% over a period of 6 years, with annual payments at the end of the year. Loan will include several restrictions, such as a limit on dividends and bonus payments for XYZ and a requirement for collateral. XYZ Company weighted average cost of capital is 10%.The lease rate would be $35,000 per year for 6 years, payable at the beginning of each year, while operating cash flows and the tax shield due to the lease payment will occur at the end of each year. Under this lease contract, XYZ company will be restricted of usage of this equipment to 2,500 hours per month (XYZ will have to pay penalty for over limit the usage of equipment). Question 25 (13 points) What alternatives, leasing or buying, should be chosen, according to the equivalent loan amount approach? Provide all calculations