Swank Corporation Has Made an Offer to Brink Manufacturing to Lease

Swank Corporation has made an offer to Brink Manufacturing to lease or purchase machinery that has a useful life of 4 years. The asset sells for $55 000 and has a CCA rate of 20%. The machinery's expected salvage value is $6 000 at the end of its useful life. Swank is willing to guarantee a 4-year bank loan at a 9% interest rate, which is the best rate available, to cover the purchase price. As an alternative to a bank-financed purchase, Swank would consider a 4-year lease of Brink's machinery. The annual lease payment would be $ 12 750, with the first payment due upon signing the lease agreement. Brink Manufacturing's analysis concludes that it makes economic sense to acquire the machinery. Swank's cost of capital is 10% and its tax rate is 30%. Swank's cost of capital is 12% and its tax rate is 40%. What is the present value of Swank's purchasing cost in this case?

A) $44 369
B) $40 111
C) $39 866
D) $42 045