Mutiple 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%. Assume further that it can borrow at a before tax rate of 8%.

Choose one of the following answers

$8,000

$6,700

$8,600

$7,200

$7,600