What Is the Present Value of an Operating Lease That

question 77

Multiple Choice

What is the present value of an operating lease that involves payments of $8,000 per year (the end of the year) for 5 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 7%?

• A) $32,801.58
• B) $22,796.11
• C) $21,321.03
• D) $35,070.93

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Definitions:

Thorndike's Law of Effect

A psychological principle stating that behaviors followed by satisfying consequences are likely to be repeated, while those followed by unpleasant consequences are less likely to be repeated.

Pleasant Events

Activities or experiences that induce a state of enjoyment, happiness, or satisfaction.

Unpleasant Events

Incidents or occurrences that cause discomfort, distress, or unhappiness.

Partial Reinforcement

One of several reinforcement schedules in which not every correct response is reinforced.