A Machine Costs $2

A machine costs $2.2 million and would be depreciated straight-line to zero over four years after which it would be worthless. This machine can be leased for $645,000 per year for four years. Assume a tax rate of 21 percent and a pretax borrowing rate of 7 percent. What is the net advantage to leasing from the lessor's viewpoint?

A) −$10,621
B) −$9,988
C) −$4,464
D) −$12,082
E) −$8,840

Correct Answer:

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