Your Firm Is Considering Leasing a New Computer

question 3

Multiple Choice

Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of $1,000 per year with the first payment occurring immediately. The computer would cost $7,650 to buy and would be straight-line depreciated to a zero salvage value over 9 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 8%. The corporate tax rate is 30%. What is the NPV of the lease relative to the purchase?

• A) -$1,039.78
• B) $339.78
• C) $360.22
• D) $6,610.22
• E) None of these.

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Definitions:

Final Output

The ultimate product or result that is produced after completing a process or series of actions.

R Charts

Control charts used in statistical process control to monitor the range of variation within a sample, assessing the process stability over time.

Spread Measurement

A statistical tool used to describe the variability or dispersion of data points within a dataset.

Standard Deviation

An index to determine the range of deviation among values in a series.