At the beginning of the year, ABC Corp. began to lease a major piece of equipment. The lease payment is $10,000 per year. However, using a discount rate of 15%, ABC's management computed the present value of this lease obligation to be $35,000. If the equipment is depreciated by a rate of $7,000 per year, and the firm uses the capitalized lease method, how much reduction in pretax income will the leasing of this equipment result in during its first year?
D) $ 7,000