Use the Information for the Question(s) Below

question 54

Multiple Choice

Use the information for the question(s) below.
Your firm needs to invest in a new delivery truck. The life expectancy of the delivery truck is five years. You can purchase a new delivery truck for an upfront cost of $200,000, or you can lease a truck from the manufacturer for five years for a monthly lease payment of $4,000 (paid at the end of each month) . Your firm can borrow at 6% APR with quarterly compounding.
-The effective annual rate on your firm's borrowings is closest to:

• A) 6.00%
• B) 6.24%
• C) 6.17%
• D) 6.14%

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Definitions:

Home-Based Business

A business operated from the owner's home, often requiring minimal capital to start and allowing for flexible work schedules.

Small-Business Designation

A category that identifies a business as being relatively small in size within its industry, according to specific criteria set by governmental agencies or financial institutions.

Government Agencies

Public sector entities established by a government to implement legislation, govern, and administer public policy.