Swiss Corporation has decided to purchase a new machine that costs $6.3 million. The machine will be depreciated at a CCA rate of 30 percent and will be worthless after four years. The corporate tax rate is 40 percent. The North Bank has offered Swiss a four-year loan for $6.3 million. The repayment schedule is four yearly principal repayments of $1,575,000 and an interest charge of 10 percent on the outstanding balance of the loan at the beginning of each year. Both principal repayments and interest are due at the end of each year. Pan Leasing Corporation offers to lease the same machine to Swiss. Lease payments of $1.9 million per year are due at the beginning of each of the four years of the lease. a. Should Swiss lease the machine or buy it with bank financing? b. What is the annual lease payment that will make Swiss indifferent between leasing and buying
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