Marsden Travels Limited Is Considering a Leasing Arrangement to Acquire

Multiple Choice

Marsden Travels Limited is considering a leasing arrangement to acquire new computers and office furniture. Marsden's before-tax short-term borrowing rate is 5.5%, its before-tax long-term borrowing rate is 7%, its tax rate is 35% and the lessor's implied discount rate is 6%. Which of the following rates should Marsden use in its analysis of the lease-or-purchase issue?

A) Its before-tax long-term borrowing rate
B) The lessor's implied discount rate
C) Its after-tax long-term borrowing rate
D) Its before-tax short-term borrowing rate