Assume that there is a 0.4 marginal tax rate. An asset with a life of three years can be bought for $25,313 or leased for $10,000 per year. Funds can be borrowed at a cost of 0.09 (payments of $10,000 per year).

a. What is the present value of the debt (the liability) if the funds are borrowed at a cost of 9 percent? Assume that the payments to the bank are $10,000 per year.

b. What is the present value of the lease payments of $10,000 (the liability)?