Food Express Is Analyzing the Purchase of Some New Equipment

question 13

Multiple Choice

Food Express is analyzing the purchase of some new equipment costing $73,000, 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 equipment can be leased for $19,600 a year for four years. The firm can borrow money at 9.5 percent and has a tax rate of 21 percent. What is the incremental annual cash flow for Year 2 if the company decides to lease the equipment rather than purchase it?

• A) −$22,297
• B) −$22,797
• C) −$21,312
• D) −$21,798
• E) −$22,821

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Definitions:

Specific Problem Areas

Particular challenges or issues within a broader context that require targeted interventions or solutions.

Long-Term Effects

The lasting consequences of actions, events, or policies, which may become apparent only with time and can be either positive or negative.

Community Service

Voluntary work intended to help people in a particular area, often mandated by courts as part of sentencing.