Medarex is considering the lease of an electronic welder costing $210,000 from Key Leasing. The period of the lease will be 6 years. The welder will be depreciated under MACRS rules for a 5-year class asset. Medarex's marginal tax rate is 40%. Annual beginning-of-the-year lease payments will be $50,000. Estimated salvage value is zero. Assuming Medarex's after-tax cost of borrowing is 15%,
compute the net advantage to leasing. (Problem requires MACRS tables.)
A) $8,527
B) -$17,592
C) -$67,174
D) $21,427
D
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