Alito Storage Is Debating Between Purchasing Some Equipment for $39,500

question 156

Multiple Choice

Alito Storage is debating between purchasing some equipment for $39,500 cash or leasing the equipment for $22,900 a year. The equipment only has a 2-year life after which time it is expected
To have a parts resale value of $3,900. The equipment belongs in a 50 percent CCA class. Alito
Borrows money at 10.5 percent, and has sufficient tax loss carryovers to offset any potential taxable
Income the firm might have over the next five years. What is the net advantage to leasing?

• A) -$7,318
• B) -$5,048
• C) -$2,113
• D) $21
• E) $1,907

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Definitions:

Articles of Incorporation

A document filed with a state government to legally document the creation of a corporation.

Secretary of State

An official in many countries who is in charge of foreign affairs, or in some cases, domestic affairs and state administration.

Filed

Filed refers to the process of submitting a document officially to a court or government agency, making it part of the public record.

Watered Shares

Shares issued in exchange for property that has been overvalued. Also called watered stock. See also discount shares.