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Northern Lights Is Trying to Decide Whether to Lease or Buy

Question 64

Multiple Choice

Northern Lights is trying to decide whether to lease or buy some new equipment. The equipment costs $68,000 and has a life of three years. The company has a tax rate of 21 percent, a cost of borrowed funds of 8.75 percent, and uses straight-line depreciation over the life of the equipment. What is the amount of the annual depreciation tax shield?


A) $4,760
B) $5,878
C) $6,937
D) $7,087
E) $14,960

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