Bob's Pizza Is Considering Either Leasing or Buying a New

question 56

Multiple Choice

Bob's Pizza is considering either leasing or buying a new oven.The lease payments would be $10,200 a year for 3 years.The purchase price is $29,000.The equipment has a 3-year life and then is expected to have a resale value of $3,100.Bob's Pizza uses straight-line depreciation,borrows money at 10 percent,and has a 32 percent tax rate.What is the net advantage to leasing?

• A)$809
• B)$833
• C)$848
• D)$853
• E)$898

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Definitions:

Affect Value

Influence the worth or desirability of something, often referring to factors that can alter the perceived value of a product or service in the marketplace.

Purchasing Process

A series of steps undertaken by organizations to acquire goods or services from suppliers.

Recognized and Described

Acknowledged or identified and then explained or detailed in words.

Vendor/Supplier Managed

A situation in which the supplier takes responsibility for maintaining inventory levels and ordering supplies, typically based on previously agreed-upon guidelines with the purchaser.