Pluto, inc. is trying to decide whether to lease or buy some new equipment. The equipment costs $38,000, has a 3-year life and is worthless after the 3 years. The after-tax discount rate is percent.

The annual depreciation tax shield is $4,307 and the after-tax

annual lease payment is $9,240. What is the net advantage to leasing?

/1 mark

O a. -$2,641

O b. $1,333

O c. $3,427

O d. -$1,337

O e. $1,108

DogChew Products needs to replace its rawhide tanning and molding equipment. It can be used for five years and will have no salvage value. The equipment costs $930,000. The firm can lease it for $245,000 a year, or it can borrow the money to purchase the equipment at 9%. The firm's tax rate is 39%. The CCA rate is 20% (Class 8).

What is the after-tax lease payment?

• a. $149,450

O b. $245,000

O c. $106,150

O d. $95,550

O e. $123,350