DogChew Products Needs to Replace Its Rawhide Tanning and Molding

question 57

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) .

Assuming straight-line depreciation to a salvage value of zero, what is the break-even lease payment?

• A) $216,788
• B) $225,621
• C) $272,326
• D) $293,037
• E) $317,903

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Definitions:

NAFTA

The North American Free Trade Agreement, a treaty between Canada, Mexico, and the United States that eliminated most tariffs on trade between the countries.

Argentina

A country located in the southern half of South America, known for its diverse landscapes, rich culture, and significant contributions to agriculture and global markets.

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The total number of humans currently living on earth, a figure that is continuously changing due to births and deaths.

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Networks of individuals, organizations, resources, activities, and technology involved in the creation and sale of a product, from the delivery of source materials from the supplier to the manufacturer, and eventually to the end user.