Jenkins Company has decided to acquire office equipment(copiers, printers, etc.) that it will use at its headquartersbuilding for the next five years. The equipment would cost $500,000to purchase. Alternately, Jenkins could lease the equipment forfive years, at an annual cost of $120,000. The lease includesequipment maintenance, which would otherwise be anticipated to cost$40,000 per year. The estimated salvage value of the equipmentafter five years is $100,000. The five-year MACRS schedule appliesfor tax depreciation. Jenkins’ tax rate is 34%. You can assumethat, should Jenkins purchase the equipment, it will borrow$500,000 to do so. The loan would call for Jenkins to pay $40,000per year in interest, and to repay the principal after at the endof year five. The appropriate discount rate for this problem is5.28% (the after tax cost of borrowing). You can also assume thatJenkins would earn this rate (after tax) on any cash balances. Allcash flows except the initial purchase and borrowing areend-of-period. Finally, you can assume that Jenkins’ taxable incomeis high enough that the tax deductible expenses associated withthis decision would indeed reduce the company’s tax liability. (a)Suppose that Jensen wanted to set aside a sum of money now thatwould be sufficient to fund the after-tax costs of acquiring theassets through the lease. How much money would they need to setaside? (b) Suppose that Jensen wanted to set aside a sum of moneynow that would be sufficient to fund the after-tax costs ofacquiring the assets through the “borrow to purchase” alternative.How much money would they need to set aside? (c) Which alternativedo you recommend, and why?