a. What is a lease-equivalent loan? Why is it inappropriate to compare leasing to buying? (3 marks) b. Kraft Foods plans to purchase or lease $14 million worth of new manufacturing equipment. If purchased, this equipment will qualify for accelerated depreciation: 30% can be expensed immediately, followed by 20%,20%,15% and 15% over the next four years. Kraft Foods will also be responsible for maintenance expenses of $0.8 million per year. Alternatively, it can lease the equipment for $3.5 million per year for four years, in which case the lessor will provide necessary maintenance. Assume Kraft Foods' before-tax borrowing cost is 7% per annum, its tax rate is 35%, the lease qualifies as a true tax lease, and the lease payments are made at the beginning of each year. Is Kraft Foods better off leasing the equipment or financing the purchase using the lease-equivalent loan? Why? (Note: show your workings) (7 marks)