Merkon Inc

question 90

Multiple Choice

Merkon Inc.must choose between purchasing a new asset for $86,000 or leasing the asset for four years for $27,500 annual rent.The purchased asset would be 3-year recovery property that Merkon could use for four years,after which the asset would have no salvage value.Assuming a 21% tax rate,an 8% discount rate,and no Section 179 deduction or bonus depreciation,which of the following statements is true? Use Appendix A,Table 7-2.(Round discount factor(s) to 3 decimal places.)

• A)Merkon's after-tax cost of the purchase is $8,517 less than the after-tax cost of the lease.
• B)Merkon's after-tax cost of the lease is $1,374 less than the after-tax cost of the purchase.
• C)Merkon's after-tax cost of the purchase is $8,517 more than the after-tax cost of the lease.
• D)None of the choices are correct.

Comprehend how fixed and variable costs influence the cost-volume-profit (CVP) analysis.

Understand the calculation and significance of the margin of safety for business decision-making.

Calculate target income and the impact of changes in sales volume on profitability.

Understand the application and limitations of various methods for analyzing cost behavior.

---

Definitions:

Racial Discrimination

Unjust or prejudicial treatment of individuals based on their race, often resulting in inequality of rights and opportunities.

Compensatory Damages

Monetary compensation awarded to a plaintiff to make up for loss, injury, or harm suffered due to the defendant’s actions.

Punitive Damages

Monetary compensation awarded in excess of actual damages to punish or deter a defendant from engaging in conduct considered outrageous or extremely wrongful.

Civil Rights Act

Landmark legislation in the United States aimed at ending discrimination based on race, color, religion, sex, or national origin, and promoting equal access to public spaces and employment.