The Discount Store Is Trying to Decide Whether to Lease

question 38

Multiple Choice

The Discount Store is trying to decide whether to lease or buy some new equipment. The equipment costs $42,000, has a 4-year life, and will be worthless after the 4 years. The cost of borrowed funds is 9.5 percent and the tax rate is 34 percent. The equipment can be leased for $11,400 a year. What is the amount of the after-tax lease payment?

• A) $3,876
• B) $7,524
• C) $8,126
• D) $8,360
• E) $9,814

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