The Round Top Is Contemplating the Acquisition of Some New

question 148

Multiple Choice

The Round Top is contemplating the acquisition of some new tents. The purchase price is $156,000. The CCA represents 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent of the value over years 1 to 4, respectively. The tents will be worthless after four years. The tents can be leased for four years at $40,500 a year. The firm can borrow money at 8.5 percent and has a 35 percent tax rate. What is the net advantage to leasing?

• A) $14,107
• B) $14,470
• C) $14,596
• D) $15,211
• E) $15,407

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