Your Firm Is Considering Leasing a New Robotic Milling Control

question 49

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 after-tax cash flow from leasing in year 0?

• A) $300,000
• B) $495,000
• C) $852,000
• D) $948,000
• E) None of these.

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Definitions:

M/M/S

A queueing model denoting a system with multi-servers where both arrivals and service times are Markovian (memoryless and exponentially distributed).

M/D/1

A queueing model notation that represents a system with a Poisson arrival process, deterministic service time, and a single server.

Limited Population

A specific, restricted group of individuals or entities considered within a particular context or study.