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Financing - Debi Test your understanding 1 (Integration question) Penny Co wishes to invest in a new lorry costing $130,000. The lorry has a life of four years and no scrap proceeds are expected to be available after this period. Tax allowable depreciation is available at 25% on a reducing balance basis. The company can borrow at 12% pre-tax. The lorry could alternatively be leased for a cost of $40,000 per year payable in arrears for four years. Assume for now that the full lease payment is a tax deductible expense and that no tax allowable depreciation can be claimed on a leased asset. Corporation tax is 33% payable one year in arrears. Required: Determine whether the company should lease or purchase the asset