Your fiRm Is Considering Either Leasing or Buying Some New

question 204

Multiple Choice

Your firm is considering either leasing or buying some new equipment. The lease payments will be $25,600 a year. The purchase price is $72,800. The equipment belongs in a 35 percent CCA class
And has a 3-year life after which time it is expected to have a resale value of $9,500. Your firm
Borrows money at 11 percent, and has a 34 percent tax rate. What is the net advantage to leasing?

• A) -$1,407
• B) -$129
• C) $129
• D) $1,407
• E) $5,745

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Definitions:

Dot-com Start-Ups

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Market Value

The current price at which an asset or service can be bought or sold in the marketplace.

Sale Of Shares

The process of selling ownership units of a company, usually in the form of stock, to investors or the public.

Lewin's Model

A change management model developed by Kurt Lewin which describes organizational change through three stages: Unfreezing, Changing, and Refreezing.