Morrison Industrial Tool can either lease or buy some equipment. The lease payments will be $9,000 a year. The purchase price is $31,000. The equipment has a 3-year life after which time it is expected to have a resale value of $4,000. The firm uses straight-line depreciation, borrows money at 10 percent and has a 33 percent tax rate.

What is the incremental cash flow for year 1 if the company decides to lease the equipment rather than purchase it?

($9,440)

($1,096)

$5,992

($16,152)

($26,410)

Please also show in excel spreadsheet thank you