Your Firm Is Considering Leasing a New Robotic Milling Control

question 24

Multiple Choice

Your firm is considering leasing a new robotic milling control system.The lease lasts for 5 years.The lease calls for 6 payments of £300,000 per year with the first payment occurring at lease inception.The black box would cost £1,050,000 to buy and would be straight-line depreciated to a zero salvage.The actual salvage value is zero.The firm can borrow at 8%,and the corporate tax rate is 34%. What is the after-tax cash flow from leasing in year 0?

• A)£300,000
• B)£495,000
• C)£852,000
• D)£948,000
• E)None of the above.

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Definitions:

Unearned Revenue

Income received by a business for goods or services yet to be provided, often recorded as a liability on the balance sheet until the revenue is earned.

Accrued Revenue

Income that a company has earned but has not yet received payment for.

Depreciation

The methodical distribution of a physical asset's cost across its lifespan, mirroring its depreciation over time.

Supplies

Items and materials used in the daily operations of a business, often consumable and regularly replaced.