You Are the CFO of a Company

You are the CFO of a company.You are considering leasing photocopiers from the manufacturer instead of purchasing them for $200,000.You can borrow at 9.0% and the corporate tax rate is 35.0%.The lease payment will be $50,000 each year for 5 years, beginning immediately.At the end of the 5 years, the photocopiers will be worthless.Assume that the photocopiers can be depreciated by $40,000 per year for 5 years, for tax purposes.Should the firm lease the photocopiers?

A) Yes, the IRR of the lease incremental cash flows is greater than the after-tax cost of borrowing.
B) No, the IRR of the lease incremental cash flows is less than the after-tax cost of borrowing.
C) Yes, the IRR of the lease incremental cash flows is less than the after-tax cost of borrowing.
D) No, the IRR of the lease incremental cash flows is greater than the after-tax cost of borrowing.