Baxter Contractors Is Evaluating the Lease Versus the Purchase of a $329,000

question 10

Multiple Choice

Baxter Contractors is evaluating the lease versus the purchase of a $329,000 machine.The machine will be depreciated using MACRS over a 4-year period,after which the machine will be worthless.MACRS allows for 33.33 percent,44.44 percent,14.82 percent,and 7.41 percent depreciation over years 1 to 4,respectively.The machine could be leased for $105,000 a year for 4 years.The firm can borrow money at 9.5 percent and has a 35 percent tax rate.The firm does not expect to pay any taxes for the next 5 years.What is the net advantage to leasing?

• A)-$4,587
• B)-$7,471
• C)-$18,640
• D)-$21,651
• E)-$30,277

Describe the mechanisms through which monetary policy affects the economy, especially through open market operations.

Understand the Fisher effect and how inflation expectations affect nominal interest rates.

Understand the relationship between inflation rates and money demand.

Grasp the key assumptions of the quantity theory of money.