The Wildcat Oil Company Is Trying to Decide Whether to Lease

question 21

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 $1,700,000 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)$541,287
• B)$658,844
• C)$660,318
• D)$661,828
• E)$664,719

---

Definitions:

Wellness

The active process of becoming aware of and making choices towards a healthy and fulfilling life, encompassing physical, mental, and social well-being.

Exercise Regularly

The practice of engaging in physical activity on a consistent basis to improve or maintain physical fitness and overall health.

Fatty Foods

Foods high in fat content, which can be saturated or unsaturated and are often linked to various health concerns when consumed in excess.

Responsibility

The state or fact of having a duty to deal with something or of having control over someone, often involving accountability.