Ellis Enterprises Is Considering Whether to Lease or Buy Some

Ellis Enterprises is considering whether to lease or buy some necessary equipment it needs for a project that will last the next 3 years.If the firm buys the equipment,it will borrow $4,800,000 at 8.0% interest.The firm's tax rate is 35%,and the firm's before-tax cost of debt is 8.0%.Annual maintenance costs associated with ownership are estimated to be $400,000,and the equipment will be depreciated on a straight-line basis over 3 years.What is the annual end-of-year lease payment (in thousands of dollars) for a 3-year lease that would make the firm indifferent between buying or leasing the equipment? (Suggestion: Delete 3 zeros from dollars and work in thousands. ) Do not round your intermediate calculations.

A) $2,599
B) $2,147
C) $2,260
D) $1,695
E) $1,808