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Use the following information to answer questions 4-7 Marschall's is trying to decide whether to lease or buy some new equipment. The equipment costs $62,000 and has a 4-year lfe. The equipment will be worthless after the 4 years and will have to be replaced. The company has a tax rate of 35 percent, a cost of borrowed funds of 9 percent, and uses straight-line to zero depreciation. The equipment can be leased for $16,500 a year for 4 years. What is the amount of the after-tax lease payment? a. $5,775 b. $8,350 C. $10,725 d. $11,690 e. $11,700 4 5. What is the first year after-tax cash flows if the company decides to borrow $62,000 at 9 percent to purchase the equipment? a. $5,775 b. $8,350 C. $11,760 d. $11,690 e. $11,700 6. What is the present value of the (borrow and) purchase decision? A. $43,137.05 b. $40,300.00 c. $37,291.26 d. $62,000.00 7 At the discount rate of 5.85 percent (after tax cost of debt), will you choose to borrow and purchase or lease the equipment? Why? A. Lease because PV of lease is lower by $5845.79 b. Lease because PV of lease is lower by $4324.11 c. Purchase because PV of purchase is lower by $5845.79 d. Purchase because PV of lease is lower by $4324.11 6. What is the present value of the (borrow and) purchase decision? A. S43,137.05 b. $40,300.00 c. $37.291.26 d. $62,000.00 7. Atthe discount rate of 5.85 percent (after tax cost of debt), will you choose to borrow and purchase or lease the equipment? Why? A. Lease because PV of lease is lower by $5845.79 b. Lease because PV of lease is lower by $4324.11 c. Purchase because PV of purchase is lower by $5845.79 d. Purchase because PV of lease is lower by $4324.11 Edit in Google Docs