Question: Lester's Gym wants to expand its facilities by obtaining $62,000

Lester's Gym wants to expand its facilities by obtaining $62,000 worth of new exercise equipment. The equipment will have a 4-year life, belongs in a 25% CCA class, and will have no residual value. The cost of borrowed funds is 9.5 percent, the weighted average cost of capital is 12% and the tax rate is 40 percent. Assume the lease payments are payable at the beginning of each year and the lease qualifies as a true tax lease. What is Lester’s breakeven lease payment?

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