1. A lease has a term of 8 years with annual payments of $24,100. The asset would cost $118,000 to buy and would be depreciated straight-line to a zero salvage value over 8 years. The actual salvage value is zero. If the firm has a tax rate of 25 percent, what is the incremental cash flow in Year 8 of leasing rather than purchasing?

a. $14,856.50

b. -$16,375.00

c. -$25,418.50

d. $16,375.00

e. -$21,762.50