DogChew Products Needs to Replace Its Rawhide Tanning and Molding

question 116

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 after-tax lease payment?

• A) $95,550
• B) $106,150
• C) $123,350
• D) $149,450
• E) $245,000

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Definitions:

Independent Auditors

Independent auditors are external auditors who examine the financial records and practices of a corporation to ensure accuracy and compliance with generally accepted accounting principles.

Financial Statements

Comprehensive reports that provide information on a company's financial performance, financial position, and cash flows over a specific period.

Corporate Governance

The procedures designed to ensure that the company is managed in the interests of the shareholders.