Present and Future Value Tables of $1 at 3% Are

question 122

Multiple Choice

Present and future value tables of $1 at 3% are presented below:

-A firm leases equipment under a long-term lease (analogous to an installment purchase) that calls for 12 semiannual payments of $39,014.40. The first payment is due at the inception of the lease. The annual rate on the lease is 6%. What is the value of the leased asset at inception of the lease?

• A) $388,349.
• B) $400,000.
• C) $454,128.
• D) $440,082.

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Definitions:

Initial Investments

The sum of money used to start a business venture, purchase capital assets, or invest in a project.

Income Taxes

Government levies on the earnings of individuals and companies within their territory.

After-Tax Discount Rate

The discount rate used in investment or project valuation that accounts for the effects of taxes on the project's cash flows.

Straight-Line Depreciation

A method of allocating an asset's cost evenly over its useful life.