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George works as an accountant for a plumbing company which needs a new equipment. The...

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Finance

George works as an accountant for a plumbing company which needs a new equipment. The equipment will cost $50,000, and it must be replaced in six years, after which it is worthless. It falls under Class 8 so the CCA rate is 20%. The firm can issue debt at 5%. If not buying the equipment, the company can also lease the equipment for $9,000 per year. If the tax rate is 35%, what is the after-tax cost of debt?

a) 1.75%

b) 8.40%

c) 3.25%

d).1.00%

e) 4.00%

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