Question: FINANCE is considering buying or leasing a server. The purchase price for the server is $300,000. The lease payments would be $75,000 per year for

FINANCE is considering buying or leasing a server. The purchase price for the server is $300,000. The lease payments would be $75,000 per year for 4 years. The equipment will be depreciated over 5 years, using straight line depreciation, and then have $50,000. FINANCE can borrow money at 4.0%, has a 17.5% weighted average cost of capital and a 20% tax rate. (a) What is the difference in cost of leasing vs buying? (b) Should FINANCE buy or lease the server and why?

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