Your Firm Is Considering Leasing a New Computer

question 10

Multiple Choice

Your firm is considering leasing a new computer.The lease lasts for 9 years.The lease calls for 10 payments of £1,000 per year with the first payment occurring immediately.The computer would cost £7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years.The actual salvage value is negligible because of technological obsolescence.The firm can borrow at a rate of 8%.The corporate tax rate is 30%. What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in years 1-9?

• A)£-255
• B)£-955
• C)£-1,295
• D)£-1,850
• E)None of the above.

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Definitions:

Federal Government

The national government of a federation, which holds the authority to govern issues that affect the entire country, contrasted with state or local governments.

Individual Freedoms

The rights and liberties that can be claimed by individuals by virtue of being human; often include freedom of speech, religion, and the press.

Dred Scott v. Sandford

A landmark Supreme Court case in 1857 which held that African Americans, whether enslaved or free, could not be American citizens and therefore had no standing to sue in federal court.