The Wildcat Oil Company Is Trying to Decide Whether to Lease

question 32

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 $850,000 in annual pretax cost savings.The system costs $8 million and will be depreciated straight-line to zero over 5 years.Wildcat's tax rate is 34 percent,and the firm can borrow at 8 percent.Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $2,040,000 per year.Lambert's policy is to require its lessees to make payments at the start of the year.What is the maximum lease payment that would be acceptable to the company?

• A)$1,893,231
• B)$1,896,996
• C)$1,904,506
• D)$1,906,318
• E)$1,911,472

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Definitions:

Clinical Pathways

Standardized care plans that outline the optimal sequencing and timing of interventions by healthcare professionals for a specific diagnosis or procedure.

Managed Care

A healthcare delivery system aimed at managing cost, quality, and utilization of services to provide cost-effective care.

Assertive Community Treatment

is an intensive, team-based approach to mental health care, focusing on providing comprehensive services to individuals with serious mental illnesses in their communities.

Psychiatric Status

The current state or condition of an individual's mental health, as assessed by a mental health professional.