Your Firm Is Considering Either Leasing or Buying Some New

question 218

Multiple Choice

Your firm is considering either leasing or buying some new equipment. The lease payments will be $5,600 a year. The purchase price is $17,900. The equipment has a 4-year life after which time it is expected to have a resale value of $1,500. The equipment belongs in a 30 percent CCA class. Your firm borrows money at 8.6 percent, and has a 35 percent tax rate. What is the incremental cash flow for year 1 if the company decides to lease the equipment rather than purchase it?

• A) -$5,515
• B) -$5,247
• C) -$4,828
• D) -$4,580
• E) -$4,109

---

Definitions:

Electric Shock

A sudden discharge of electricity through a part of the body, which can cause a range of effects from a mild tingling to severe injury or even death.

Positive Reinforcer

A trigger that, when applied post-behavior, augments the likelihood of the recurrence of that behavior.

Primary Reinforcer

A stimulus that satisfies a basic need or instinct, such as food, water, or warmth, and is inherently rewarding.

Fixed-Ratio Schedule

A reinforcement strategy in operant conditioning where a response is rewarded only after a specified number of responses.