Your Firm Is Considering Leasing a New Computer

question 55

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%. This lease would be classified as a(n) :

• A) operating lease because the asset will be obsolete.
• B) operating lease because there is no amortization.
• C) leveraged lease because it is being financed.
• D) capital lease because the lease life is greater than 75% of the economic life.
• E) sale and leaseback because the company gets full use of the asset.

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Definitions:

Word Choices

The selection of specific words to convey meaning, tone, and style in written or spoken communication.

Concise Message

Communication that is clear and brief, delivering the intended message in as few words as necessary.

"It Is" Starters

A writing technique often used to introduce or emphasize a statement or concept.

Digital Media

Digital media refers to content that is created, distributed, and accessed on digital devices, including text, audio, video, and graphics.