Burton Enterprises Is Trying to Determine If Leasing Would Be

question 227

Multiple Choice

Burton Enterprises is trying to determine if leasing would be a better alternative than purchasing $61,000 of new equipment. The equipment has a 4-year life after which time it will be worthless. The equipment belongs in a 20 percent CCA class and can be leased for $16,000 a year. The firm can borrow money at 7.25 percent and has a 35 percent tax rate. What is the incremental annual cash flow for year 2 if the company decides to lease the equipment rather than purchase it?

• A) -$28,020
• B) -$20,868
• C) -$14,243
• D) -$11,667
• E) -$9,564

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Definitions:

Traditional Surrogacy

Occurs when the surrogate’s egg is fertilized by the father’s sperm, making the child biologically related to the father and the surrogate.

Artificial Insemination

A medical procedure that involves the deliberate insertion of sperm into a female's cervix or uterine cavity for the purpose of achieving pregnancy without sexual intercourse.

In Vitro Fertilization

A medical procedure where an egg is fertilized by sperm outside of the body, often used as a treatment for infertility.

Family Violence

Acts of violence or abuse among members of a family, including physical, sexual, emotional abuse, or neglect, occurring within domestic settings.