Calipers and More Is Weighing a Lease Versus a Purchase

question 143

Multiple Choice

Calipers and More is weighing a lease versus a purchase of some new machinery. The purchase price is $231,800. The equipment has a 4-year life after which time it is expected to have a resale value of $68,000. The equipment belongs in a 30 percent CCA class and the firm can borrow money at 9.5 percent. The equipment can be leased for $62,900 a year for 4 years. Calipers does not expect to owe any taxes for the next 4 years because of accumulated net operating losses. What is the net advantage to leasing?

• A) -$36,209
• B) -$18,104
• C) $18,104
• D) $36,209
• E) $77,537

---

Definitions:

Stop-Payment Order

a request made to a bank by an account holder not to pay a check that has been issued but not yet cashed.

Loss

A decrease in value, resources, or money typically as a result of a business transaction, investment, or unforeseen events.

Postdated

Pertaining to a check or other document that bears a date later than the actual date it was written, to be cashed or deposited at that later date.

Liable

Legally responsible or obligated, as in being held accountable for an action or in relation to a debt or infringement.