Your Firm Is Considering Leasing a New Computer

question 42

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%. This lease would be classified as a(n) :

• A) operating lease because the asset will be obsolete.
• B) operating lease because there is not amortization.
• C) leveraged lease because it is being financed.
• D) financial lease because the lease life is greater than 75% of the economic life.
• E) sale and leaseback because the company gets full use of the asset.

Evaluate the effect of inflation on real wages and purchasing power over time.

Understand the implications and calculation methods for changes in employment numbers in different industries.

Assess the economic impact of different rates on investments and choose the optimal investment option.

Critically analyze real-life financial news and advertisements for their acknowledgment of the time value of money.

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Definitions:

Detrimental Effects

Negative impacts or outcomes that arise from a particular action or set of conditions, often leading to harm or disadvantage.

Perceive Leaders

How individuals within an organization view its leaders, often based on leadership style, effectiveness, and personal interactions.

Men and Women

Refers to the two fundamental human sexes, each with its own biological and social characteristics, playing diverse roles in society.

Masculine and Feminine

Terms used to describe characteristics or attributes traditionally associated with men and women, respectively, often influencing social roles and behaviors.