A Lease with a Term of 6 Years Calls for Annual

question 37

Multiple Choice

A lease with a term of 6 years calls for annual payments of $2,100.The leased asset would cost $9,200 to buy and would be depreciated straightline to a zero salvage value over the 6 years.The actual salvage value is negligible.The firm can borrow at a rate of 8 percent.What is the NPV of the lease relative to the purchase if the lessee's tax rate is 21 percent?

• A)$410.22
• B)−$444.04
• C)$444.04
• D)−$410.22
• E)$399.07

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Definitions:

Barry Schwartz

An American psychologist famous for exploring the social and psychological effects of free choice.

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