Black Hammer Tools Is Contemplating the Acquisition of Some New

question 260

Multiple Choice

Black Hammer Tools is contemplating the acquisition of some new equipment at a cost of $94,000. Assume that the CCA 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent of the value
Over years 1 to 4, respectively. After that time, the equipment will be worthless. The equipment can
Be leased for $25,000 a year for 4 years. The firm can borrow money at 8.5 percent and has a 35
Percent tax rate. What is the net advantage to leasing?

• A) $6,529
• B) $6,547
• C) $6,868
• D) $7,109
• E) $7,438

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