Your Firm Is Considering Leasing a New Computer

question 16

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 NPV of the lease relative to the purchase?

• A)£-1,039.78
• B)£ 339.78
• C)£ 360.22
• D)£6,610.22
• E)None of the above.

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Definitions:

Suffix

A morpheme added at the end of a word to form a derivative or to indicate grammatical features such as tense, mood, person, number, case, and gender.

Predict

To declare or indicate in advance, especially on the basis of special knowledge or inference.

Suffix

A letter or group of letters added at the end of a word to modify its meaning or change it into a different word class.

Supply

The total amount of a product or service that is available for purchase or use.