Your Firm Is Considering Leasing a New Robotic Milling Control

question 21

Multiple Choice

Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception. The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage value. The actual salvage value is zero. The firm can borrow at 8%,and the corporate tax rate is 34%. What is the minimum lease payment that the lessor would be willing to accept?

• A) $161,000
• B) $176,995
• C) $217,645
• D) $237,083
• E) None of these.

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Definitions:

Properly Greased

Refers to the application of an appropriate amount of grease to mechanical parts to ensure smooth operation and prevent wear.

Bearing Caps

Components that help to secure and protect bearings, ensuring they remain in their proper position.

Matched Set

Items that are manufactured or selected to work together optimally, often referring to parts that are used together in machinery or systems.

U-joint Fails

The failure of a universal joint, a crucial component in the drivetrain of a vehicle, leading to a loss of connection between the driveshaft and the differential or gearbox.