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Your firm needs a $725,000 machine. If purchased, the machine will be depreciated straight-line over seven years and is expected to have a residual value

Your firm needs a $725,000 machine. If purchased, the machine will be depreciated straight-line over seven years and is expected to have a residual value of $25,000 at the end of the seventh year. Your (pre-tax) cost of borrowing is 6.5% and tax rate is 21%. If this is a non-tax lease, with beginning of year payments, what is the maximum lease payment for which you would prefer the lease to the alternative of borrowing money to buy the machine?

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