(Negotiating a lease rate) Amalgamated Leasing Corp. would like to submit a leasing proposal to the Sandoval Hardware Manufacturing Company. Sandoval has asked to lease 5 million worth of equipment under a 6 year lease. Amalgamated can depreciate the equipment for tax purposes on a straight line basis over the 6 year term to an estimated residual value of 250,000. The leasing firms income tax rate is 40%. Amalgamated has estimated sandovals 6 year cost of funds to be 10% for secured debt (83.33% financing) and 12% for unsecured debt. It has also estimated the required after-tax return for an investment in the assets to be 15%.

Assume Sandoval pays income taxes at a 30% rate. Calculate Sandoval's net advantage to leasing at Amalgamated indifference lease rate.

Multiple choices are:

-$10,835.07

-$10,235.07

-$9,833.45

-$8,225.93

-$7,011.77

$7,011.77

$8,225.93

$9,833.45

$10,235.07

$10,835.07