Traynor Industries Is Considering Either Leasing or Buying Some New

question 22

Multiple Choice

Traynor Industries is considering either leasing or buying some new equipment. The lessor will charge $9,950 a year as the annual lease payment. The purchase price is $27,900. The equipment
Belongs in a 30 percent CCA class and has a 3-year life after which time it will be worthless. Traynor
Borrows money at 7.25 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) -$1,234
• B) -$733
• C) -$508
• D) -$111
• E) $22

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Definitions:

Encoding Specificity Principle

The theory that memory is improved when information available at encoding is also present at retrieval.

Sensory Store

A very short-term form of memory that allows individuals to retain impressions of sensory information after the original stimuli have ended.

Retrieval Cue

A trigger or stimulus that aids the recall of information from memory.

Long-Term Memory

The phase of memory responsible for the storage of information over extended periods, potentially as long as a lifetime.