Webster's Tree Farm Is Considering the Purchase of a Backhoe

question 261

Multiple Choice

Webster's Tree Farm is considering the purchase of a backhoe costing $47,000. The backhoe can be leased for 5 years at $13,900 per year or it can be purchased at an interest rate of 7 percent.
The estimated life of the backhoe is 5 years after which time it will be worthless. The corporate tax
Rate is generally 35 percent. However, the company does not expect to owe any taxes for the next
6 years due to accumulated net operating losses. The backhoe belongs in a 20 percent CCA class.
What is the net advantage to leasing?

• A) -$13,982
• B) -$9,009
• C) -$6,111
• D) $189
• E) $3,007

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Definitions:

Greek Art

An art form rooted in ancient Greece, characterized by its emphasis on beauty, harmony, and proportion, and includes architecture, sculpture, and pottery.

Athenian Acropolis

An ancient citadel on a rocky outcrop above Athens, containing the Parthenon and other notable buildings symbolizing the cultural and political heights of the ancient Athenian civilization.

Stoa of Attalos

A reconstructed ancient covered walkway or portico in Athens, significant in the study of Greek architecture.

Erechtheion

An ancient Greek temple on the Acropolis of Athens, known for its distinctive Porch of the Maidens (Caryatids) and historical significance in classical mythology.