You are planning on acquiring a machine for a business that you have just started. The machine costs $35,000 and you can get a 5-year term loan at 10%; at the end of the five years, the machine is expected to have a value of $5,000. The manufacturer of the equipment is willing to lease the machine for $8,000 a year payable at the beginning of the year. If the firm leases, it will acquire the machine for $5,000 at the end of 5 years (ignore depreciation on this acquisition). The machine will be depreciated straight-line to its salvage value over 5 years. The tax rate for your business is 35%. Should you buy or lease?

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