What Is the Present Value of an Operating Lease That

question 36

Multiple Choice

What is the present value of an operating lease that involves payments of $12,000 per year (the end of the year) for 14 years with no possibility of purchase at the end of the lease term.Assume that the firm is in the 35% marginal tax rate and the pre-tax cost of debt for the firm is 9%?

• A) $73,179.04
• B) $93,433.80
• C) $60,731.97
• D) $112,583.13

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Definitions:

Expected Price Level

This term represents the anticipated average price of goods and services in an economy over a certain period.

Potential GDP

The maximum possible level of output an economy can achieve when all resources are utilized efficiently, without causing inflation.

Prices

The amount of money required to purchase goods or services, acting as a signal in the market to influence supply and demand.

Natural Level of Employment

The rate of employment where the labor market is in equilibrium, with no cyclical unemployment.