The S Company is considering the acquisition of a new processor used in its operation. The processor has an installed cost of $50,000 and is expected to have a useful life of 5 years. If purchased, the firm would borrow the entire $50,000 at an interest rate of 8%. The processor would be depreciated over a 5 year ACRS life to a zero book value, but it is estimated that it could be sold for $7,000 after 5 years. A capital budgeting analysis indicates that purchase of the processor has a positive NPV. Alternatively, S Company can lease the processor for the 5 year period for an annual lease payment of $13,500. If the processor is leased, annual operating expenses of $2,700 will be paid by the lessor. If the equipment is purchased, the firm will incur this expense. S Company's cost of capital is 12% and its marginal tax rate is 35%.

If S Company borrows to purchase the processor, what is the annual loan payment?

$10,269

$14,026

$11,396

$12,523