Use the Information for the Question(s)below

question 15

Multiple Choice

Use the information for the question(s) below.
Suppose the purchase price of a bulldozer is $90,000,its residual value in four years is certain to be $15,000,and there is no risk that the lessee will default on the lease.Assume that capital markets are perfect and the risk-free interest rate is 6% APR with monthly compounding.
-Suppose that instead of leasing the bulldozer,the company is considering purchasing a bulldozer outright by borrowing the purchase price using a four-year annuity loan.The monthly loan payments for a four-year loan to purchase the bulldozer are closest to:

• A)$2115.
• B)$1825.
• C)$1870.
• D)$1750.

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Definitions:

Critical Thinking

The objective analysis and evaluation of an issue in order to form a judgment, characterized by open-mindedness and the ability to question assumptions.

Well-supported Reasons

Arguments or explanations that are backed by solid evidence, making them persuasive and credible.

Empirical Research

A way of gaining knowledge by means of direct and indirect observation or experience, often involving systematic data collection and experimentation.

Anecdotes

Short, often amusing or interesting stories about a real incident or person.