What Is the Present Value of an Operating Lease That

question 26

Multiple Choice

What is the present value of an operating lease that involves payments of $5,000 per year (the end of the year) for 10 years with no possibility of purchase at the end of the lease term.Assume that the firm is in the 40% marginal tax rate and the pre-tax cost of debt for the firm is 8%?

• A) $38,986.43
• B) $23,391.86
• C) $20,130.24
• D) $18,000.00

---

Definitions:

Globalization

The process by which businesses or other organizations develop international influence or start operating on an international scale, leading to the increased interconnectedness of the world's economies, cultures, and populations.

Microsoft

An American multinational technology company known for its software products, including the Windows operating system and Office suite, as well as hardware and cloud services.

WTO

The World Trade Organization, an international body that oversees global trade rules among nations, aiming to ensure trade flows as smoothly, predictably, and freely as possible.

Tiananmen Square

The site of a 1989 pro-democracy protest in Beijing, China, which was forcibly suppressed by the government leading to significant loss of life and international condemnation.