Fred's Garage Is Trying to Decide Whether to Lease or Buy

Fred's Garage is trying to decide whether to lease or buy some new equipment. The equipment costs $48,000 and has a 6-year life. The equipment will be worthless after the 6 years and will have to be replaced. The company has a tax rate of 31 percent, a cost of borrowed funds of 7.5 percent, and uses straight-line depreciation. The equipment can be leased for $10,600 a year. What is the amount of the aftertax lease payment?

A) $3,286.00
B) $7,314.00
C) $7,862.55
D) $8,406.16
E) $10,928.60