To Finance Some Manufacturing Tools It Needs for the Next

question 20

Multiple Choice

To finance some manufacturing tools it needs for the next 3 years, Waldrop Corporation is considering a leasing arrangement.The tools will be obsolete and worthless after 3 years.The firm will depreciate the cost of the tools on a straight-line basis over their 3-year life.It can borrow $4,800,000, the purchase price, at 10% and buy the tools, or it can make 3 equal end-of-year lease payments of $2,100,000 each and lease them.The loan obtained from the bank is a 3-year simple interest loan, with interest paid at the end of the year.The firm's tax rate is 25%.Annual maintenance costs associated with ownership are estimated at $240,000, but this cost would be borne by the lessor if it leases.What is the net advantage to leasing (NAL) , in thousands? (Suggestion: Delete 3 zeros from dollars and work in thousands.)

• A) $119
• B) $132
• C) $139
• D) $146
• E) $153

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Definitions:

Cortisol Levels

The concentration of cortisol, a stress hormone, in the blood, which can affect various body functions.

Narcolepsy

A chronic sleep disorder characterized by overwhelming daytime drowsiness and sudden attacks of sleep.

Sleep

A naturally recurring state of mind and body characterized by altered consciousness, relatively inhibited sensory activity, reduced muscle activity, and inhibition of nearly all voluntary muscles during rapid eye movement (REM) and non-REM stages.

NREM Sleep

A type of sleep characterized by non-rapid eye movement, encompassing stages 1-3 of the sleep cycle.