DogChew Products needs to replace its rawhide tanning and moulding equipment. me new equipment costs S930.000 and has a 5 year li has no salvage value. The new in Class 8 with a depreciation rate of 20%. The firm's tax rale is 39% and the firm can borrow money at 9%. The company can buy the new equipment or it can be leased for 5 years with a yearly before-tax lease cost of S245,000 payable in advance.
What is the net advantage of leasing? Should the firm purchase or lease the equipment?