Your Company Is Considering the Purchase of a Fleet of Cars

Multiple Choice

Your company is considering the purchase of a fleet of cars for $195,000. It can borrow at 8.5%. The cars can be leased for $55,000 per year and will be worthless at the end of four years. The corporate tax rate is 34% and the cars belong in CCA class 10 (a 30% class) . If you do not expect to pay taxes for the next four years, what is the net advantage to leasing?

A) -$471
B) $1,455
C) $7,842
D) $14,767
E) $15,217