The Wildcat Oil Company Is Trying to Decide Whether to Lease

question 12

Multiple Choice

The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $1.2 million in annual pretax cost savings. The system costs $6.7 million and will be depreciated straight-line to zero over 4 years. Wildcat's tax rate is 35 percent, and the firm can borrow at 11 percent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $1,750,000 per year. Lambert's policy is to require its lessees to make payments at the start of the year. Lambert requires Wildcat to pay a $270,000 security deposit at the inception of the lease. What is the NAL of leasing the equipment?

• A)$522,408
• B)$541,287
• C)$550,318
• D)$561,828
• E)$564,719

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Definitions:

Prokaryotic Operon

A prokaryotic operon is a functioning unit of genomic DNA containing a cluster of genes under the control of a single promoter and is regulated together, typically found in bacteria.

RNA Polymerase

An enzyme responsible for copying a DNA sequence into an RNA sequence, during the process of transcription.

Promoter Sequence

A promoter sequence is a region of DNA that initiates transcription of a particular gene, controlling gene expression.

PAX6 Gene

A gene crucial for the development of the eyes, brain, and pancreas in mammals, mutations in which can lead to various eye disorders.