You Are the Manager of a Sales Division, and Are

question 1

Multiple Choice

You are the manager of a sales division, and are considering leasing a fleet of cars for your staff.You can buy the cars for $300,000 or you can lease them for 8 years at $60,000 per year with payments due at end of each year.The company has a tax rate of 40.0% and a CCA rate of 10.0% on vehicles.If the company buys the cars and finances the purchase with a loan, they will pay 7.0% in interest.Assume that after the term of the lease is over, the salvage value of the cars will be zero.What is the NPV of the lease, based on half-year rule for CCA in the first year?

• A)$217,196
• B)$59,610
• C)-$23,194
• D)-$240,390

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