DogChew Products Needs to Replace Its Rawhide Tanning and Molding

question 201

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) .

Using straight-line depreciation to a salvage value of zero, what is the net advantage to leasing?

• A) -$79,102
• B) -$53,266
• C) $136,269
• D) $138,706
• E) $152,062

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Definitions:

Barrier

An obstacle that prevents movement or access.

Bone Matrix

The non-cellular, structural component of bone, consisting of collagen fibers and ground substance that house bone cells.

Collagen Fibers

Strong, fibrous proteins found in connective tissue, including skin, tendons, and ligaments, providing strength and elasticity.

Elastic Fibers

Protein fibers found in connective tissue, giving flexibility and resilience to organs and tissues.