Northern Lights Is Trying to Decide Whether to Lease or Buy

Northern Lights is trying to decide whether to lease or buy some new equipment. The equipment costs $51,000, has a 5-year life, and will be worthless after the 5 years. The company has a tax rate of 34 percent, a cost of borrowed funds of 8.75 percent, and uses straight-line depreciation. The equipment can be leased for $14,100 a year. What is the amount of the annual depreciation tax shield?

A) $3,468
B) $5,878
C) $6,936
D) $8,407
E) $10,200