Al-Tek Is Considering Leasing Some New Equipment for 5 Years

question 50

Multiple Choice

Al-Tek is considering leasing some new equipment for 5 years with annual payments.The equipment would cost $115,000 to buy and would be depreciated straightline to a zero salvage value.The actual salvage value is zero.The applicable pretax borrowing rate is 8 percent.The lessee does not expect to owe taxes for several years.The lessor's tax rate is 21 percent.What is the minimum lease payment that will be acceptable to both parties?

• A)$28,603.33
• B)$28,745.16
• C)$27,750.00
• D)$22,708.67
• E)$26,709.12

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Definitions:

Dividends Per Share

The total dividends declared by a company for each share of its stock.

Accounts Receivable Turnover

A financial metric that measures how efficiently a company collects revenue from its credit customers, calculated by dividing net credit sales by average accounts receivable.

Days' Sales In Receivables

A financial ratio that measures the average number of days it takes for a company to collect payments from its credit sales.

Price-Earnings Ratio

A financial ratio that measures a company's share price relative to its earnings per share, indicating investor expectations of growth and profitability.