Williams' Paints Is Weighing a Lease Versus a Purchase of Some

question 59

Multiple Choice

Williams' Paints is weighing a lease versus a purchase of some new machinery.The purchase price is $312,000.The equipment will be depreciated to zero over the 4-year life of the project after which time it is expected to have a resale value of $76,000.The firm uses straight-line depreciation and can borrow money at 8 percent.The equipment can be leased for $66,000 a year for 4 years.Williams' Paints does not expect to owe any taxes for the next 4 years because of its net operating losses.What is the net advantage to leasing?

• A)$9,846
• B)$11,900
• C)$24,924
• D)$28,207
• E)$37,537

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