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:

Normative Influence

In groups, a form of influence that occurs when a member conforms to group norms in order to receive the rewards or avoid the punishments that are contingent on adherence to these norms.

Informational Influence

A social influence process where individuals change their thoughts, beliefs, or behaviors based on information or evidence from others.

Minimal Groups

Experimental paradigms used in social psychology to demonstrate how even arbitrary and seemingly meaningless distinctions between groups can lead to discrimination and prejudice.

Normative Influence

Refers to the impact of societal norms on an individual's behavior, often leading to conformity in order to gain social acceptance or avoid social disapproval.