Multiple choice Q

If a firm can buy a machine for $100000, takes an investment tax credit of 20%, and lease outthe machine for 9 years with lease payments at the beginning of the year, how much should the minimum annual lease payments be? Assume a 5-year straight-line depreciation, $33000 salvage and a tax rate of 40%. What would the minimum annual lease payments be if the machine can be salvaged for $33000 at the end of the lease and the after-tax required rate of return is 5.4%?

Choose from one of the following

$8,000

$8,600

$7,200

$7,600

$6,700