C. Suppose that Japsy Inc. wants to acquire a piece of equipment costing $10,000 for use in the fabrication of microprocessors. A leasing company is willing to finance the equipment with a 5-year "true" lease. The terms of the lease call for an annual payment of $2,500. The lease payments are made at the end of each of the five years. For simplicity, assume a five-year straight-line depreciation will be used for the equipment, and, after five years, the machine will be worthless. Japsy is liable to pay tax of 34% and cost of debt is 7.57%. a. Prepare the incremental cash flow schedule for Japsy Inc. from Leasing instead of buying. (7 marks) b. What is the implicit after-tax interest rate on the lease? (4 marks) (Hint: 5 Yr. Annuity] C. What is the company's after-tax borrowing cost? (3 marks) d. Which option (please clarity) is a cheaper source of financing? (3 marks) C. Suppose that Japsy Inc. wants to acquire a piece of equipment costing $10,000 for use in the fabrication of microprocessors. A leasing company is willing to finance the equipment with a 5-year "true" lease. The terms of the lease call for an annual payment of $2,500. The lease payments are made at the end of each of the five years. For simplicity, assume a five-year straight-line depreciation will be used for the equipment, and, after five years, the machine will be worthless. Japsy is liable to pay tax of 34% and cost of debt is 7.57%. a. Prepare the incremental cash flow schedule for Japsy Inc. from Leasing instead of buying. (7 marks) b. What is the implicit after-tax interest rate on the lease? (4 marks) (Hint: 5 Yr. Annuity] C. What is the company's after-tax borrowing cost? (3 marks) d. Which option (please clarity) is a cheaper source of financing