A. During the year, a farmer pays $1000 principal and $500 interest on a tractor loan. His annual depreciation expense is $4000. His operating expenses including fuel, oil, and repairs total $500 for the year (ignore fuel tax credits). His marginal tax rate is 25%. What is his after-tax cost of using the tractor for the year?

B. If the farmer leased the tractor for the year for $1200, how much would his after-tax cost of using the tractor be?

Please explain the answer and why you used the numbers that you did. Thank you.