Devon Corp

question 77

Multiple Choice

Devon Corp.is trying to decide whether to lease or purchase a piece of equipment.The total cost lease the equipment will be $150,000 over its estimated life,while the total cost to buy the equipment will be $120,000 over its estimated life.At Devon's required rate of return,the net present value of the cost of leasing the equipment is $108,000 and the net present value of the cost of buying the equipment is $119,000.Based on financial factors,Devon should:

• A)lease the equipment,saving $30,000 over buying.
• B)buy the equipment,saving $30,000 over leasing.
• C)lease the equipment,saving $11,000 over buying.
• D)buy the equipment,saving $11,000 over leasing.

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Definitions:

Cooperation

The process of groups or individuals working together toward common goals or interests.

Dictator Game

A mutually anonymous behavioral economics game in which one person (“the dictator”) unilaterally determines how to split an amount of money with the second player.

Behavioral Economists

Specialists in economics who analyze the impact of various factors like psychological, cognitive, emotional, cultural, and social on the financial decisions of both individuals and institutions.

Economic Behavior

The actions and decisions made by individuals, households, firms, and governments in relation to production, consumption, work, and investment, influenced by economic policies and market conditions.