Knight Motors Is Considering Either Leasing or Buying Some New

question 60

Multiple Choice

Knight Motors is considering either leasing or buying some new equipment. The lease payments would be $14,500 a year for 3 years. The purchase price is $52,000. The equipment has a 3-year
Life and then is expected to have a resale value of $12,000. Knight Motors uses straight-line
Depreciation, borrows money at 9 percent, and has a 35 percent tax rate. What is the net
Advantage to leasing?

• A) -$2,742
• B) -$2,212
• C) -$1,611
• D) $3,529
• E) $3,898

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Definitions:

Demand Curve

A chart that illustrates the link between a product's price and the amount of the product that buyers are prepared and capable of buying at different price levels.

Government Purchase

The buying of goods and services by government agencies, contributing to public sector spending.

Privileged Information

Confidential communications between certain individuals, such as an attorney and his or her client, that are protected from disclosure except under court order.

Confidential Information

Sensitive data or knowledge that is protected from unauthorized access and disclosure, often within a legal, professional, or corporate context.