Deep Mining,Inc

question 44

Multiple Choice

Deep Mining,Inc.,is contemplating the acquisition of some new equipment for controlling coal dust that costs $174,000.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.After that time,the equipment will be worthless.The equipment can be leased for $53,100 a year for 4 years.The firm can borrow money at 11.5 percent and has a 36 percent tax rate.What is the net advantage to leasing?

• A)$5,225
• B)$5,607
• C)$6,611
• D)$6,847
• E)$6,950

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Definitions:

Research And Development

Activities undertaken by businesses or governments in innovation and introduction of new products or processes, involving substantial investment in experimentation and testing.