The S Company is considering the acquisition of a new processor used in its operation. The processor has an installed cost of $55,000 and is expected to have a useful life of 5 years. If purchased, the firm would borrow the entire $55,000 at an interest rate of 9%. The processor would be depreciated over a 5 year ACRS life to a zero book value, but it is estimated that it could be sold for $7,000 after 5 years. A capital budgeting analysis indicates that purchase of the processor has a positive NPV. Alternatively, S Company can lease the processor for the 5 year period for an annual lease payment of $11,500. If the processor is leased, annual operating expenses of $2,900 will be paid by the lessor. If the equipment is purchased, the firm will incur this expense. S Company's cost of capital is 12% and its marginal tax rate is 35%.

If S Company borrows to purchase the processor, total tax deductible expenses for year 3 are: a. $20,305 b. $16,383 c. $17,671 d. $22,144

If S Company borrows to purchase the processor, the net cost of owning for year 3 is: a. $10,855 b. $9,474 c. $7,956 d. $12,076

The present value of the costs of owning is: a. $49,056 b. $48,254 c. $45,545 d. $46,794

If S Company borrows to purchase the processor, total tax deductible expenses for year 3 are: a. $20,305 b. $16,383 c. $17,671 d. $22,144

If S Company borrows to purchase the processor, the net cost of owning for year 3 is: a. $10,855 b. $9,474 c. $7,956 d. $12,076

The present value of the costs of owning is: a. $49,056 b. $48,254 c. $45,545 d. $46,794

The PV of the cost of leasing the is?

The present value of the cost of leasing the processor is:

a. $34,317

b. $34,832

c. $33,776

d. $34,465