Fred's Garage Is Trying to Decide Whether to Lease or Buy

question 43

Multiple Choice

Fred's Garage is trying to decide whether to lease or buy some new equipment.The equipment costs $48,000 and has a 6-year life.The equipment will be worthless after the 6 years and will have to be replaced.The company has a tax rate of 34 percent,a cost of borrowed funds of 7.5 percent,and uses straight-line depreciation.The equipment can be leased for $10,600 a year.What is the amount of the aftertax lease payment?

• A)$3,286.00
• B)$6,996.00
• C)$7,862.55
• D)$8,406.16
• E)$10,928.60