A Firm Is Considering Leasing a Printing Machine

question 5

Multiple Choice

A firm is considering leasing a printing machine.The lease lasts for 3 years.The lease calls for 3 payments of $4,000 per year with the first payment occurring immediately.The machine would cost $7,500 to buy and would be straight-line depreciated (tax purpose) to zero salvage value over 3 years.The firm can borrow at 5%, and has a corporate tax rate is 30%.What is the NPV of the lease?

• A)$1,482
• B)- $2,838
• C)- $654
• D)- $1,552
• E)None of the above

---

Definitions:

Stockholders

Individuals or entities that own a share or shares of stock in a corporation, granting them certain rights and a stake in the company's performance.

Acquisition

The process of obtaining control of another company by purchasing its shares or assets.

Capital Needs

Capital needs are the financial requirements a company needs to maintain and grow its operations, including funds for investment in assets, technology, and workforce.