Buster's Beverages Is Negotiating a Lease on a New Piece

question 3

Multiple Choice

Buster's Beverages is negotiating a lease on a new piece of equipment that would cost $100,000 if purchased. The equipment falls into the MACRS 3-year class, and it would be used for 3 years and then sold, because the firm plans to move to a new facility at that time. The estimated value of the equipment after 3 years is $30,000. A maintenance contract on the equipment would cost $3,000 per year, payable at the beginning of each year. Alternatively, the firm could lease the equipment for 3 years for a lease payment of $29,000 per year, payable at the beginning of each year. The lease would include maintenance. The firm is in the 20% tax bracket, and it could obtain a 3-year simple interest loan, interest payable at the end of the year, to purchase the equipment at a before-tax cost of 10%. If there is a positive Net Advantage to Leasing the firm will lease the equipment. Otherwise, it will buy it. What is the NAL?

• A) $5,736
• B) $6,023
• C) $6,324
• D) $6,640
• E) $6,972

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Definitions:

Exploitive Leadership

A leadership style characterized by taking unfair advantage of one's followers or employees, often for personal gain.

Tall Organizational Structures

Organizations with many levels of hierarchy, typically characterized by a longer chain of command and narrow spans of control.

Flat Organizational Structures

Flat organizational structures are characterized by minimal levels of management and hierarchy, aiming to promote direct communication and collaboration among employees.

Enlightened Leadership

A leadership style that emphasizes awareness, compassion, and ethical practices, focusing on the well-being of employees and stakeholders.