Leasing versus borrowing.

Office Supplies $($OS$)$ Distributors needs a new truck. It can buy it for $$24,000,$

depreciate it over four years at an annual rate of $$6,000,$ and finance the purchase

with a four$-$year loan at $10$ percent. The truck could be sold for $$5,000$ in four years.

Alternatively, it can lease the truck and make four annual lease payments of $$6,500$

$($payments are made at the beginning of the year$).$ OS Distributors is subject to a

$40-$percent corporate tax rate and is responsible for the maintenance and insurance

of the truck, regardless of whether it leases or buys it$.$

a$.$ Should OS Distributors lease or buy the truck?

b$.$ What resale value of the truck in four years will make OS Distributors indifferent

about buying versus leasing?