Your Firm Is Considering Leasing a Radiographic X-Ray Machine

question 10

Multiple Choice

Your firm is considering leasing a radiographic x-ray machine. The lease lasts for 3 years. The lease calls for 4 payments of $25,000 per year with the first payment occurring immediately. The computer would cost $140,000 to buy and would be straight-line depreciated to a zero salvage value over 3 years. The actual salvage value is negligible. The firm can borrow at a rate of 12%. The corporate tax rate is 40%. What is the NPV of the lease relative to the purchase?

• A) -$125,000
• B) $115,412
• C) $75,000
• D) $125,000
• E) None of these.

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Definitions:

Relationship

A connection, association, or involvement between two or more variables or entities.

Standard Error

The standard deviation of the sampling distribution of a statistic, most commonly the mean.

Regression Slope

Indicates the steepness and direction of the linear relationship between two variables on a regression plot.

Variance

A calculation of how spread out a data set is, determined by the mean of the squared deviations from the average.