Mosely Enterprises Is Trying to Decide Whether to Lease or Buy

question 92

Multiple Choice

Mosely Enterprises is trying to decide whether to lease or buy some new equipment. The equipment costs $57,000, has a 4-year life and will be worthless after the 4 years. The cost of
Borrowed funds is 9.5 percent and the tax rate is 35 percent. The equipment can be leased for
$15,000 a year. What is the amount of the annual depreciation tax shield if the firm uses straight-line
Depreciation?

• A) $4,225.00
• B) $4,528.90
• C) $4,987.50
• D) $5,123.60
• E) $5,250.00

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Definitions:

Forfeit

To lose or give up something as a penalty for wrongdoing or failure to comply with certain conditions.

Legitimate Interest

A recognized reasonable ground that an organization may have for processing personal data without needing consent under certain data protection laws.

Injunction

A court order requiring an individual or entity to do or cease doing a specific action.

Restriction

A limitation or constraint placed on actions, activities, or movements, often found in legal contexts or agreements.