Maxine's Is Considering Either Purchasing or Leasing a $600,000 Piece

question 41

Multiple Choice

Maxine's is considering either purchasing or leasing a $600,000 piece of specialized equipment. The equipment has a life of 5 years, belongs in a 30% CCA class, and will have no residual value. The cost of debt is 12% for this purchase. A lease on the equipment for 5 years is priced at $150,000 a year. Maxine's corporate tax rate is 34%. The lessor has a tax rate of 35%.

What is Maxine's break-even lease payment amount?

• A) $109,057
• B) $133,677
• C) $155,980
• D) $170,802
• E) $182,968

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Definitions:

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Freud

Sigmund Freud, an Austrian neurologist and the founder of psychoanalysis, a clinical method for treating psychopathology.

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The intentions or desired achievements that guide actions and decision-making to achieve specific outcomes.

Adler

Alfred Adler was an Austrian medical doctor, psychotherapist, and founder of the school of individual psychology, emphasizing the importance of feelings of inferiority and the creative self.