Your Firm Is Considering Either Leasing or Buying Some New

question 126

Multiple Choice

Your firm is considering either leasing or buying some new equipment. The lease payments will be $21,000 a year. The purchase price is $59,000. The equipment has a 3-year life after which time it is expected to have a resale value of $22,000. The equipment belongs in a 25 percent CCA class. Your firm borrows money at 8 percent, and normally has a 34 percent tax rate. The company does not expect to owe any taxes for at least 5 years because they have accumulated net operating losses. What is the incremental cash flow for year 2 if the company decides to lease the equipment rather than purchase it?

• A) -$24,613
• B) -$22,702
• C) -$21,000
• D) -$20,533
• E) -$20,114

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Definitions:

Incompatible Goals

Incompatible goals describe objectives or aims set by individuals or groups within an organization that conflict with each other, potentially leading to disputes or inefficiencies.

Ambiguous Rules

Ambiguous Rules refer to regulations, guidelines, or instructions that are unclear, vague, or open to more than one interpretation, often leading to confusion or varied compliance.

Task Interdependence

Describes the degree to which tasks within a group or organization require coordination and cooperation among members to be completed effectively.

Different Standards

Variations in criteria or benchmarks used for comparison or judgment across different situations or by different groups.