Leigh Fibers Wishes to Lease an Automated Knitting Machine Valued

question 33

Multiple Choice

Leigh Fibers wishes to lease an automated knitting machine valued at $420,000 from Ogden Capital for a period of 10 years.Ogden expects to depreciate the asset on a straight-line basis to a salvage value of $0.Actual salvage value is also expected to be $0 at the end of the 10-year period.If Ogden requires a 15% after-tax rate of return on the lease, what is the lease payment required from Leigh Fiber? Assume that the lease payments will be made at the beginning of each year and that the marginal tax rate is 40%.

• A)$111,470
• B)$145,395
• C)$96,930
• D)$58,158

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Definitions:

Secondary Growth

Growth that results in an increase in girth or thickness of plants, particularly in woody plants.

Primary Xylem

The portion of the xylem that is formed during the primary growth of plants, responsible for the transport of water and nutrients from the roots.

Lateral Meristems

A type of plant tissue found in the stems and roots of plants, responsible for growth in diameter or thickness.

Sclerenchyma Tissue

A type of plant tissue characterized by thick, tough cell walls that provide structural support and protection.