Maxine's Is Considering Either Purchasing or Leasing a $600,000 Piece

question 41

Multiple Choice

Maxine's is considering either purchasing or leasing a $600,000 piece of specialized equipment. The equipment has a life of 5 years, belongs in a 30% CCA class, and will have no residual value. The cost of debt is 12% for this purchase. A lease on the equipment for 5 years is priced at $150,000 a year. Maxine's corporate tax rate is 34%. The lessor has a tax rate of 35%.

What is Maxine's break-even lease payment amount?

• A) $109,057
• B) $133,677
• C) $155,980
• D) $170,802
• E) $182,968

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Definitions:

Well-being

A state of health, happiness, and prosperity; a comprehensive measure of overall quality of life.

Sense Of Coherence

A global orientation expressing the extent to which one has a pervasive, enduring, and dynamically consistent set of feelings about life being comprehensible, manageable, and meaningful.

Ego Integrity

A sense of fulfillment and self-acceptance achieved in later life, reflecting back on one’s life with a sense of completeness and satisfaction.

Ego Integrity

A sense of satisfaction and completeness that comes from looking back on one’s life and feeling a sense of accomplishment and contentment, as proposed by Erik Erikson's stages of psychosocial development.