Omni Enterprises is considering whether to borrow funds and purchase an asset or to lease the asset under an operating lease arrangement. If it purchases the asset, the cost will be $10,000. It can borrow funds for four years at 12 percent interest. The asset will qualify for a 25 percent CCA. Assume a tax rate of 35 percent.

The other alternative is to sign two operating leases, one with payments of $2,600 for the first two years and the other with payments of $4,600 for the last two years. The leases would be treated as operating leases.

1. Compute the present value of the capital cost allowance.(Do not round intermediate calculations.Round the final answer the nearestwhole dollar.)
2. Compute the aftertax cost of the borrow-purchase alternative.(Do not round intermediate calculations.Round the final answers the nearestwhole dollar.)

Year1

Year2

Year3

Year4

3. Compute the present value of the aftertax cost of the two alternatives.(Round intermediate calculationsand round the final answers the nearest whole dollar.)

For Leasing:

For Borrowing/Purchase