Year $1234567$

Buyer Option

Down Payment $5000000000$

Repairs $1000150025003000350040004500$

Loan Payment $10564105641056410564105641056410564$

Tax Reduction $3912391440454024399039423879$

Salvage Value $00000031000$

Lease Option

Up$-$front charges $3000003000003000$

Lease Cost $7500750075007500750075007500$

Tax Reduction $2940210023802940210023802940$

Lease Penalty $0010000010000$

A farmer is about to make a lease or buy decision about a tractor. The tractor is financed at an interest rate of $8\%$ for seven years, with an annual payment of $$10564.$ The cash flows of both options for seven years and the factors taken into consideration are summarized in the table below. Also, it is assumed that there are no repair costs associated with leasing the equipment.