Alito Storage Is Debating Between Purchasing Some Equipment for $39,500

Alito Storage is debating between purchasing some equipment for $39,500 cash or leasing the equipment for $22,900 a year. The equipment only has a 2-year life after which time it is expected to have a parts resale value of $3,900. The equipment belongs in a 50 percent CCA class. Alito borrows money at 10.5 percent, and has sufficient tax loss carryovers to offset any potential taxable income the firm might have over the next five years. What is the net advantage to leasing?

A) -$7,318
B) -$5,048
C) -$2,113
D) $21
E) $1,907