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.

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A synthetic drug known for its psychoactive properties, often used recreationally for its euphoric effects.

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A medical condition involving a persistent and often painful erection of the penis that lasts for hours and is unrelated to sexual arousal.

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Substances that cause hallucinations—perceptions or experiences that differ from reality—and alter a person's thinking, sense of time and emotions.