The Burger Joint Is Considering Either Leasing or Buying a New

question 207

Multiple Choice

The Burger Joint is considering either leasing or buying a new freezer unit. The lessor will charge $13,300 a year for a 4-year lease. The purchase price is $38,000. The freezer has a 4-year life after
Which time it is expected to have a resale value of $12,000. The Burger Joint uses straight-line
Depreciation, borrows money at 7.5 percent, and has sufficient tax loss carryovers to offset any
Potential taxable income the firm might have over the next 5 years. What is the net advantage to
Leasing?

• A) -$2,064
• B) -$1,820
• C) $218
• D) $2,407
• E) $3,735

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Definitions:

Stable Internal

A belief that the cause of an event is due to stable, enduring factors within an individual.

Availability Heuristic

The tendency to assume that information that comes easily to mind (or is readily available) is more frequent or common.

Locus Of Causality

The position or place within an individual that determines where the cause of behavior is perceived to originate, whether internally (within oneself) or externally (outside factors).

Internal

Pertaining to or situated within something; intrinsic.