Williams' Paints Is Weighing a Lease Versus a Purchase of $312,000

question 15

Multiple Choice

Williams' Paints is weighing a lease versus a purchase of $312,000 of fixed assets. The assets would be depreciated to zero over their 4-year life after which time they can be sold for an estimated $76,000. The firm uses straight-line depreciation and can borrow at 8 percent. The equipment can be leased for $66,000 a year for four years. The firm does not expect to owe any taxes for the next five years because of its operating losses. What is the net advantage to leasing?

• A) $9,841
• B) $11,904
• C) $24,922
• D) $28,208
• E) $37,537

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Definitions:

Institutionalized Socialization Tactics

Strategies used by organizations to acclimate new employees to the corporate culture and practices, often through structured programs and processes.

Divestiture

The process of selling off subsidiary business interests or investments, often to streamline operations or focus on core activities.

Debasement

refers to the act of lowering in rank, dignity, or significance, often through degradation or depreciation.

Hazing

The practice of subjecting newcomers to abusive, humiliating, or challenging tasks and rituals, often as a rite of passage in certain groups or organizations.