National Rail Can Purchase Equipment for $386,000 That Would Be

National Rail can purchase equipment for $386,000 that would be depreciated using the MACRS rates of 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent for Years 1 to 4, respectively. The equipment will be worthless after four years. The equipment can be leased for four years at $110,500 a year. The firm can borrow at 8 percent and has a tax rate of 21 percent. What is the net advantage to leasing?

A) $11,789
B) $10,862
C) $13,742
D) $12,087
E) $10,127

Correct Answer:

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