Use the Information for the Question(s)below

question 35

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 $4000 (paid at the end of each month) .Your firm can borrow at 6% APR with quarterly compounding.
-The present value of the lease payments for the delivery truck is closest to:

• A)$206,900.
• B)$207,050.
• C)$207,680.
• D)$198,420.

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Definitions:

Purchasing Department

A division within a company responsible for acquiring goods and services needed for business operations.

Expense Allocation

The process of distributing costs among different departments, projects, or segments within an organization.

Direct Expenses

Expenses that can be directly traced to producing specific goods or services, such as raw materials and labor costs.

Cash Conversion Cycle

The length of time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.