Sandia Inc

question 24

Multiple Choice

Sandia Inc. wants to acquire a $360,000 computer-controlled printing press. If owned, the press would be depreciated on a straight-line basis over 10 years to a book salvage value of $0. The actual cash salvage value is expected to be $25,000 at the end of 10 years. If purchased, Sandia will incur annual maintenance expenses of $3,000. These expenses would not be incurred if the press is leased. If the press is purchased, Sandia could borrow the needed funds at an annual pre-tax interest rate of 10%. The lease rate would be $48,000 per year, payable at the beginning of each year. If Sandia has an after-tax cost of capital of 12% and a marginal tax rate of 40%, what is the net advantage to leasing?

• A) $60,713
• B) $65,543
• C) $57,173
• D) $37,737

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Definitions:

Support Slides

Visual aids used in presentations to reinforce the spoken message and help convey information more effectively.

Networking

The process of making connections with mutually beneficial business contacts.

Informal Connections

Relationships or networks that are established through casual or unofficial interactions.

Mutually Beneficial

A situation or agreement that provides advantages or positive outcomes for all parties involved.