DogChew Products Needs to Replace Its Rawhide Tanning and Molding

question 153

Multiple Choice

DogChew Products needs to replace its rawhide tanning and molding equipment. It can be used for five years and will have no salvage value. The equipment costs $930,000. The firm can lease it for
$245,000 a year, or it can borrow the money to purchase the equipment at 9%. The firm's tax rate is
39%) The CCA rate is 20% (Class 8) .
What is the net advantage to leasing?

• A) -$88,132
• B) -$20,592
• C) $1,269
• D) $13,706
• E) $15,062

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Definitions:

Reserve Fund

A savings or fund set aside for future expenses, emergencies, or capital projects.

Endowment Fund

An endowment fund is a financial asset, in the form of donated funds or property, invested to generate income for a specific purpose, usually non-profit.

Consolidated Statement

A financial report that shows aggregated financial data for a parent company and its subsidiaries, presenting the financial position and results of operations as a single entity.

Summarized Listing

A condensed version of a list that highlights main points or entries, often used for quick reference.