Prime Care Has Approached the Leasing Department of First City

question 30

Multiple Choice

Prime Care has approached the leasing department of First City Bank to arrange lease financing for a $1.2 million CAT scanner. The economic life of the scanner is estimated to be 10 years. The estimated salvage value at the end of 10 years is $0. First City plans to depreciate the scanner on a straight-line basis over 10 years. If First City charges a beginning-of-the-year lease payment of $255,395, what after-tax rate of return will the bank earn on the lease? Assume a marginal tax rate of 40%.

• A) 4.7%
• B) 16.8%
• C) 13%
• D) 40%

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Definitions:

Bulimia Nervosa

An eating disorder marked by recurrent episodes of binge eating followed by compensatory behaviors such as purging, fasting, or excessive exercise.

Anorexia Nervosa

An eating disorder characterized by fear of being fat, a distorted body image, radically reduced consumption of food, and emaciation.

Forced Vomiting

An act of deliberately inducing vomiting, often associated with eating disorders.

Leptin-Deficient

Lacking sufficient levels of leptin, a hormone that regulates energy balance by inhibiting hunger, which can lead to obesity.