Northern Lights Is Trying to Decide Whether to Lease or Buy

question 70

Multiple Choice

Northern Lights is trying to decide whether to lease or buy some new equipment.The equipment costs $54,000,has a 5-year life,and will be worthless after the 5 years.The company has a tax rate of 34 percent,a cost of borrowed funds of 8.75 percent,and uses straight-line depreciation.The equipment can be leased for $14,100 a year.What is the amount of the annual depreciation tax shield?

• A)$3,672
• B)$5,878
• C)$6,936
• D)$8,407
• E)$10,200

Comprehend the concept of opportunity cost as a fundamental principle in economics.

Understand the role of specialization and trade in improving economic outcomes.

Understand the influence of psychological dysfunction on individuals and those around them.

Recognize the complex criteria involved in determining criminal responsibility in individuals with psychological disorders.

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Definitions:

Common Fixed Expenses

Costs that are shared across different segments or departments of a business and do not vary with the level of production or sales.

On-Site Supervisor

An individual responsible for overseeing and managing workers or operations at a specific physical location.

Corporate Office

The main office or headquarters of a corporation where key administrative and executive activities are conducted.

Common Fixed Expenses

Common fixed expenses are overhead costs shared across multiple segments or products of a business, like administrative salaries or building rent.