DogChew Products Needs to Replace Its Rawhide Tanning and Molding

question 121

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) .
Using straight-line depreciation to a salvage value of zero, what is the net advantage to leasing?

• A) -$79,102
• B) -$53,266
• C) $136,269
• D) $138,706
• E) $152,062

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Definitions:

Resistance To Change

The opposition or reluctance to modify or abandon traditional practices or to adapt to new ones.

Dramatic Increase

A significant and rapid rise in numbers, magnitude, or extent of a particular phenomenon or metric.

Kurt Lewin

is known as the father of modern social psychology, who developed theories on group dynamics and organizational development.

Force Field Analysis

A method developed by Kurt Lewin to analyze the factors that support or hinder a particular situation or desired change by identifying and evaluating driving and restraining forces.