The Glade Global company is trying to decide whether to lease or buy a new computer assisted drilling machine for its oil exploration business. Management has already determined that acquisition of the system has a positive NPV. The new system cots $9.4 million and qualifies for a 25% CCA rate. The equipment will have a $975,000 salvage value in 5 years. Glades tax rate is 36% and the firm can borrow at 9%. Southtown leasing company has offered to lease the drilling equipment to Glade for payments of $2.15 million per year. Southtowns policy is to require its lessees to make payment at the start of the year.

What is the maximum pre-tax lease payment acceptable to the company?

a) $2,900,994

b) $2,443,674

c) $2,161,493

d) $2,444,580

answer is c