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Green Valley Farms is considering either leasing or buying somenew farm equipment. The lessor will charge $23,000 a year lease.The purchase price is $63,000. The equipment has a 3-year lifeafter which time it will be worthless. Green Valley Farms usesstraight-line depreciation, has a 32 percent tax rate, borrowsmoney at 9 percent, and has sufficient tax loss carryovers tooffset any potential taxable income the firm might have over thenext five years. What is the net advantage to leasing?
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