Randall Corp

question 96

Multiple Choice

Randall Corp. is trying to decide whether to lease or purchase a piece of equipment needed for the next five years. The equipment would cost $100,000 to purchase, and maintenance costs would be $10,000 per year. After five years, Randall estimates it could sell the equipment for $30,000. If Randall leases the equipment, it would pay $30,000 each year, which would include all maintenance costs. If the hurdle rate for Randall is 12%, Randall should:

• A) lease the equipment, as net present value of cost is about $11,000 less.
• B) buy the equipment, as net present value of cost is about $11,000 less.
• C) lease the equipment, as net present value of cost is about $30,000 less.
• D) buy the equipment, as net present value of cost is about $30,000 less.

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Definitions:

Muscle Cells

Specialized cells that contract and relax to produce movement in the body.

Autonomic Nervous System

Part of the peripheral nervous system that controls bodily functions not consciously directed, such as breathing, the heartbeat, and digestive processes.

Involuntary Muscles

Muscles that operate without conscious control, responsible for movements in the heart, digestive system, and other bodily functions.

Myelin Sheath

A layer of fatty tissue encasing the fibers of many neurons, which enhances the speed and efficiency of electrical signals traveling along the nerve cells.