A Lessor Will Charge $13,800 a Year for Four Years

question 39

Multiple Choice

A lessor will charge $13,800 a year for four years as lease payments on $47,800 of equipment. The equipment has a life of four years after which it should resell for $8,400. Your firm uses straight-line depreciation, borrows at 10 percent, and has a tax rate of 25 percent. What is the amount of the Year 4 cash flows when computing the NAL?

• A) −$16,650
• B) −$19,638
• C) −$21,738
• D) −$15,748
• E) −$17,038

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Definitions:

Accuracy

The degree to which a measured value or calculation approaches the true value, often considered in terms of error magnitude.

Metric Dimensioning

A system of measurement that uses the meter, liter, and gram as base units of length, volume, and weight, respectively.

Decimal Places

The number of digits to the right of the decimal point in a numerical value, indicating the precision of a measurement.

Limit Dimensioning

A dimensioning method where two limits of size are provided, giving the minimum and maximum allowable dimensions for manufacturing.