Your fiRm Is Considering Leasing a New Robotic Milling Control

question 21

Multiple Choice

Your firm is considering leasing a new robotic milling control system.The lease lasts for 5 years.The lease calls for 6 payments of £300,000 per year with the first payment occurring at lease inception.
The black box would cost £1,050,000 to buy and would be straight-line depreciated to a zero salvage.
The actual salvage value is zero.The firm can borrow at 8%, and the corporate tax rate is 34%.
What is the after-tax cash flow from leasing in year 0?

• A)£300,000
• B)£495,000
• C)£852,000
• D)£948,000
• E)None of the above.

---

Definitions:

Bonus

Additional compensation given to employees as a reward for their performance or as an incentive.

Bilateral Contract

A legal agreement in which each of the parties to the contract makes a promise to the other or undertakes a certain obligation.

Unilateral Contract

An agreement where one party makes a promise, but the other side does not reciprocate with a promise but with an action.

Internet Communication

The exchange of information or messages between users through the internet, utilizing various platforms and technologies.