Clark operates a sole proprietorship. He had taxable income of $45,712 in 2019 and $24,542 in 2020 from his business before accounting for the events described below.

· Clark acquired a delivery van for $33,038 on July 7, 2017, and immediately placed the van into service in his business. He has never used the van for personal purposes.

· Clark paid $1,050 for a notebook computer, which he placed into service in his business on May 16, 2018. He has used the notebook exclusively in his business (i.e., no personal use). He sold the notebook computer for $570 on September 3, 2020.

· Clark spent $423,000 on a factory building, which he placed into service in his business on January 12, 2019.

· Clark purchased a storage building (Old Storage Building) for $147,600 and placed the storage building into service in his business on March 11, 2016. On March 6, 2019, Clark exchanged the Old Storage Building for a different storage building (Replacement Storage Building) in a transaction that qualified as a like-kind exchange. On the date of the exchange, the Old Storage Building had a fair market value of $138,145 and the Replacement Storage Building had a fair market value of $139,595. As part of the exchange, the other party gave Clark a computer monitor with a fair market value of $750 and Clark gave the other party $2,200 in cash. The other party had used both the Replacement Storage Building and the computer monitor in its business and, since the date of the exchange, Clark has used both the Replacement Storage Building and the computer monitor in his business.

· Clark bought a desk at a cost of $1,900. He placed the desk into service in the business on April 12, 2019.

· On May 13, 2019, Clark placed a tablet computer into service in his business. Clark paid $2,220 for the tablet. He has documentation to show that, during 2019 and 2020, he used the tablet 100% of the time for business purposes.

· On August 13, 2020, Clark placed a couch into service. Clark paid $726 to purchase the couch.

· Clark placed a sander, which cost $743, into service on December 7, 2020.

· Finally, Clark placed a furnace into service in his business on December 19, 2020. The furnace cost $8,000. The cost of the furnace is the only amount (from either 2019 or 2020) for which Clark made a section 179 election.

Assume Clark believes that he will place equipment that costs $95,000 into service in his business during October of 2021. Clark has two options. First, he could purchase the equipment by financing 80% of the purchase price through a 36-month amortizing loan at a 4.1% rate of interest and with monthly payments beginning on November 1, 2021. Second, Clark could enter into a 48-month lease for the equipment by paying $15,000 up front (which is amortized straight line for tax purposes over the lease term) and $1,140 per month beginning on November 1, 2021. With the lease option, Clark would purchase the equipment for $40,000 at the end of the lease and immediately place the equipment into service in his business. Under either option, Clark plans to sell the equipment for $25,000 during June of 2027. Clark further believes the equipment would be the only asset he would purchase during either 2021 or 2025. Clark would not claim bonus depreciation in 2021; however, he will take advantage of bonus depreciation in 2025. If Clark pays income taxes at a 32% marginal rate, explain how the net present values of the two options differ with a 7% discount rate (simplify the calculations by assuming all payments during a year (e.g., monthly payments) occur at year end).