DogChew Products Needs to Replace Its Rawhide Tanning and Molding

question 205

Multiple Choice

DogChew Products needs to replace its rawhide tanning and molding equipment. It can be used for five years and will have no salvage value. The equipment costs $930,000. The firm can lease it for $245,000 a year, or it can borrow the money to purchase the equipment at 9%. The firm's tax rate is 39%. The CCA rate is 20% (Class 8) .

What is the net advantage to leasing?

• A) -$88,132
• B) -$20,592
• C) $1,269
• D) $13,706
• E) $15,062

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Definitions:

Brand Awareness

The degree to which customers recognize and understand the unique features or identity of a specific brand's products or services.

Marketing Mix

The set of controllable tactical marketing tools—product, price, place, and promotion—that a company uses to produce a desired response in the target market.

Purchase Rate

The frequency at which a product or service is bought over a specific period of time.

Budgeting Factor

An element or variable that is considered in the preparation of a budget, influencing or determining the amounts allocated within the budget.