Your Firm Is Considering Leasing a New Computer

question 21

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 would the after-tax cash flow in year 9 be if the asset had a residual value of $500 (ignoring any possible risk differences) ?

• A) $955
• B) $1,455
• C) $605
• D) $1,305

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Definitions:

Petty Larceny

A minor theft crime involving the stealing of property with relatively low value.

Grand Larceny

A serious theft crime involving the unlawful taking of property that exceeds a specific value, defined by law.

Pretrial Motions

Requests filed by parties to a lawsuit before the trial begins, aiming to resolve certain issues and set the trial conditions.

Motion To Suppress

A legal motion requesting that certain evidence be excluded from being presented during a trial.