Question: Rainbow Aviation needs an additional plane for five years. It can buy the plane for $360,000, using funds borrowed at 7.5% compounded monthly and then

Rainbow Aviation needs an additional plane for five years. It can buy the plane for $360,000, using funds borrowed at 7.5% compounded monthly and then sell the plane for an estimated $140,000 after five years. Alternatively, it can lease the plane for $5600 per month, payable at the beginning of each month. Which alternative should Rainbow Aviation choose? What is the financial advantage of the preferred alternative?

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