Lester's Is Analyzing a Purchase Versus a Lease for Some

question 42

Multiple Choice

Lester's is analyzing a purchase versus a lease for some equipment costing $52,800, which would be depreciated using the MACRS rates of 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent over Years 1 to 4, respectively. The firm can borrow money at 6.5 percent and has a tax rate of 21 percent. What is the amount of the depreciation tax shield in Year 3?

• A) $1,758
• B) $1,643
• C) $1,941
• D) $2,012
• E) $2,221

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Definitions:

Phonetic Alphabet

A system of writing developed by early Greeks that uses letters to represent spoken sounds, enabling the expression of complex ideas.

Complex Ideas

Thoughts or concepts that are intricate and composed of multiple interconnected elements, often requiring significant understanding or analysis.

Spoken Sounds

The auditory elements or phonetic units used in oral communication to convey language and meaning.

Telegraph Lines

Historically significant communication system that transmitted electrical signals over wires between distant locations to convey messages.