The Discount Store Is Trying to Decide Whether to Lease

question 13

Multiple Choice

The Discount Store is trying to decide whether to lease or buy some new equipment. The equipment costs $42,000, 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 34 percent. The equipment can be leased for
$11,400 a year. What is the amount of the after-tax lease payment?

• A) $3,876
• B) $7,524
• C) $8,126
• D) $8,360
• E) $9,814

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Definitions:

Medicare

A federal health insurance program in the United States primarily for people who are 65 or older, as well as for some younger people with disabilities or certain diseases.

Baby Boom Generation

The demographic group born during the post-World War II baby boom, approximately between the years 1946 and 1964, known for its significant impact on the economy, culture, and politics.

Economic Theory

A set of principles and frameworks for understanding how economies operate, encompassing aspects like production, distribution, and consumption of goods and services.

Third-Party Payments

Transactions where a person or entity other than the direct participants (buyer and seller) undertakes to cover the cost or payment, commonly found in healthcare and insurance industries.