Your Firm Is Considering Leasing a New Computer

question 15

Multiple Choice

Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of $1,000 per year with the first payment occurring immediately. The computer would cost $7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 8%. The corporate tax rate is 30%. What is the after-tax cash flow from leasing in year 0?

• A) -$6,950
• B) -$700
• C) -$7,650
• D) -$4,865

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Definitions:

Basic Elements

Fundamental components or building blocks of a complex structure or concept.

Observing Behavior

The act of monitoring and recording the behavior of oneself or others without influencing or intervening.

Watson and Skinner

Psychologists John B. Watson and B.F. Skinner, pioneers in behaviorism, emphasizing the study of observable behavior and the effects of learning and environmental factors.

Freud and James

Sigmund Freud, a founder of psychoanalysis, and William James, a pioneering psychologist, both significantly contributed to the understanding of human psychology through their work.