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The Smith & Jones Company is considering either the purchaseor lease of a new machine details asfollows:                                                                                    

                PurchaseCost of newmachine                                                 $97,000                

                AnnualMaintenance Costs payable at start ofyear              $10,000

                                                Onlypayable if machine ispurchased.                                 

                MachineUseful Life  5years                                                 

Salvage Value at end of 5th year                                       $8,000   (taxed at30%)                                 

Alternatively the machine can be leased with lease paymentscovering all capital and operating costs details asfollows.               

                AnnualLeasePayment                 $29,200payable at the start of the year

                Termof lease                                                   5years                                                 

Cash savings associated with the acquisition of the machine areexpected to be $50,000 per annum.

Other details:

                Company'sCost ofCapital                                            8%                                                                         

                CorporateTaxRate                                                     30%                                                                       

  Required:   

Should the Company LEASE the Equipment? Please show theformular. Thanks