The Discount Store Is Trying to Decide Whether to Lease

question 38

Multiple Choice

The Discount Store is trying to decide whether to lease or buy some new equipment. The equipment costs $42,000, has a 4-year life, and will be worthless after the 4 years. The cost of borrowed funds is 9.5 percent and the tax rate is 34 percent. The equipment can be leased for $11,400 a year. What is the amount of the after-tax lease payment?

• A) $3,876
• B) $7,524
• C) $8,126
• D) $8,360
• E) $9,814

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Definitions:

Budgeting

The process of creating a plan to spend your money, forecasting future income and expenses over a specified period.

Nonquantifiable Economic Events

Economic activities or occurrences that cannot be precisely measured or valued in numerical terms.

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Documents that communicate an organization's financial status to stakeholders, including income statements, balance sheets, and cash flow statements.

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