J$.$ Appleseed Ltd$.$ is considering whether to borrow funds to purchase a machine for apple picking or lease

the asset under an operating lease arrangement. The lease would be from the local leasing store with annual

lease payments, payable at the beginning of each of the next seven years of $$9,000.($Seven years is the

time horizon for the analysis.$)$

As an alternative, the owner has approached his bank to enquire about a loan to purchase the apple picking

machine. The cost of the machine is $$55,000$ and, at the end of seven years, the market $($salvage$)$ value is

estimated to be $$10,000.$ The bank has informed him that they would charge $8$ percent per year $($payable

annually, at the end of each year$).$

The equipment has a CCA rate of $25$ percent. The benefits of any tax shields are realized at the end of each

year. The company's tax rate is $20$ percent. J$.$ Appleseed Ltd$.\text{'}$s cost of capital is $15$ percent.

Required:

Gather the key facts and compute the followings in the table provided.

A$.$ Present value of borrow$-$to$-$purchase

B$.$ Present value of the lease alternative

Which alternative would you choose?

Why would you choose that alternative?J$.$ Appleseed Ltd$.$ is considering whether to borrow funds to purchase a machine for apple picking or lease the asset under an operating lease arrangement. The lease would be from the local leasing store with annual lease payments, payable at the beginning of each of the next seven years of

$($

$9,000$

$).($Seven years is the time horizon for the analysis.$)$ As an alternative, the owner has approached his bank to enquire about a loan to purchase the apple picking machine. The cost of the machine is

$(55,000$

$)$ and, at the end of seven years, the market $($salvage$)$ value is estimated to be

$($

$10,000$

$).$ The bank has informed him that they would charge $8$ percent per year $($payable annually, at the end of each year$).$ The equipment has a CCA rate of $25$ percent. The benefits of any tax shields are realized at the end of each year. The company's tax rate is $20$ percent. J$.$ Appleseed Ltd$.\text{'}$s cost of capital is $15$ percent. Required: Gather the key facts and compute the followings in the table provided. A$.$ Present value of borrow$-$to$-$purchase B$.$ Present value of the lease alternative C$.$ Which alternative would you choose?cost Economic Life Salvage Value Cost of Debt Tax Rate CCA Rate Lease Term Lease Payment Cost of Capital Discount rate $($after tax cost of debt$)$: Solution to Question $3$A: NPV of Borrow to purchase option Initial cost Present value of salvage Calculating Tax shield from CCA:

begintabular$|$c$|$c$|$

hline Calculating Tax shield from CCA:

hline C$.$SpV

hline

$($ d t

$)$

hline

$(1+$r

$)$

hline

$(1+0\mathrm{.}5$ r

$)$

hline

$(1+$r

$)$

hline dt$/$d$+$r

hline CCA Tax Shield

hline NPV $($net present value$)$

hline

endtabular Solution to Question $3$B: NPV of Lease option Present value of payments P$.$V$.$ of tax savings on payments NPV $($net present value$)$

begintabular$|$l$|$l$|$

hline

multicolumn$1|$c$|$ Solution to Question

$(3$ B:

$)$ NPV of Lease option

hline Present value of payments

hline P$.$V$.$ of tax savings on payments

hline NPV $($net present value$)$

hline

endtabular NPV of lease alternative relative to borrowing. Final recommendation: C$.$ Which altemative would vou choose? $($please dont use AI the answer from it is incorrect$)$ please answer only if you know how. thanks $($its appreciated$)$