National Event Coordinators Is Contemplating the Acquisition of a New

question 9

Multiple Choice

National Event Coordinators is contemplating the acquisition of a new tent that will be used for major outdoor events.The purchase price is $147,000.The firm uses MACRS depreciation which allows for 33.33 percent,44.44 percent,14.82 percent,and 7.41 percent depreciation over years 1 to 4,respectively.The tent will be worthless after four years.The tent can be leased for four years at $42,500 a year.The firm can borrow money at 7.5 percent and has a 34 percent tax rate.What is the net advantage to leasing?

• A)$1,789
• B)$1,862
• C)$1,922
• D)$2,087
• E)$2,127

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Definitions:

Article 2(A)

A section of the Uniform Commercial Code that specifically deals with the leasing of goods.

Uniform Commercial Code

A comprehensive set of laws governing commercial transactions in the United States, intended to harmonize the law in all 50 states.

Personal Property

Items owned by an individual or business that are movable and not permanently attached to land or buildings.

Loan Default

The failure to meet the legal obligations or conditions of a loan agreement, typically by not making the required payments on time.