Question: DIY accepts a 7 - year project that requires a special machine. The new machine costs $ 2 5 , 0 0 0 and has

DIY accepts a 7-year project that requires a special machine. The new machine costs $25,000 and has
CCA rate of 25%. The salvage value is $3,000 at the end of year 7. DIY does not have any other assets in
the asset class. Its cost of debt is 10% and tax rate is 20%.
Besides buying the machine, DIY can lease it from ATS leasing company with seven annual lease
payments of $4,800. ATS has many assets in the asset class and the UCC is always positive. Its cost of
debt and tax rate are 8% and 30% respectively.

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