Your Firm Is Considering Leasing a New Radiographic Device

question 40

Multiple Choice

Your firm is considering leasing a new radiographic device. 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 because of technological obsolescence. The firm can borrow at a rate of 12%. The corporate tax rate is 40%. What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in year 0?

• A) -$125,000
• B) -$15,000
• C) $15,000
• D) $125,000
• E) None of these.

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Definitions:

Chytridiomycota

A phylum of fungi known for their motile spores, implicated in global amphibian declines due to a disease they cause.

Ascomycota

A division of fungi characterized by the formation of spores in a sac-like structure called an ascus.

Aquatic

Pertaining to water; living in or relating to water bodies, either freshwater or marine environments.

Endomycorrhizal Fungi

These are fungi that form symbiotic relationships with the roots of plants, improving nutrient and water absorption, and are characterized by penetrating the cell walls of root cells.