Foster Inc

question 61

Multiple Choice

Foster Inc.is trying to decide whether to lease or purchase a piece of equipment needed for the next ten years.The equipment would cost $45,000 to purchase,and maintenance costs would be $5,000 per year.After ten years,Foster estimates it could sell the equipment for $20,000.If Foster leases the equipment,it would pay $12,000 each year,which would include all maintenance costs.If the hurdle rate for Foster is 10%,Foster should: (Future Value of $1,Present Value of $1,Future Value Annuity of $1,Present Value Annuity of $1. ) (Use appropriate factor from the PV tables.Do not round intermediate calculations.Round your final answer to the nearest hundred. )

• A)lease the equipment,as net present value of cost is about $5,700 less.
• B)buy the equipment,as net present value of cost is about $5,700 less.
• C)lease the equipment,as net present value of cost is about $2,000 less.
• D)buy the equipment,as net present value of cost is about $45,000 less.

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Definitions:

Corporation

A legal entity that is separate and distinct from its owners, providing them with limited liability protection.

Business Conducting

The practices, strategies, and ethical standards employed by a company in its daily operations and decision-making processes.

Advantages

Positive aspects or benefits that contribute to superior performance or competitive edge.

Corporate Form

A legal entity structure for businesses that is separate from its owners, offering limited liability and the ability to raise capital through stock.