Stanley Inc

Multiple Choice

Stanley Inc.must purchase $6,000,000 worth of service equipment and is weighing the merits of leasing the equipment or purchasing.The company has a zero tax rate due to tax loss carry-forwards, and is considering a 5-year, bank loan to finance the equipment.The loan has an interest rate of 10% and would be amortized over 5 years, with 5 end-of-year payments.Stanley can also lease the equipment for 5 end-of-year payments of $1,790,000 each.How much larger or smaller is the bank loan payment than the lease payment? Note: Subtract the loan payment from the lease payment.

A) $177,169
B) $196,854
C) $207,215
D) $217,576
E) $228,455