What Is the Present Value of an Operating Lease That

question 76

Multiple Choice

What is the present value of an operating lease that involves payments of $25,000 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 10%?

• A) $184,002.18
• B) $92,168.51
• C) $110,401.31
• D) $153,614.18

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Definitions:

Operation Dixie

A post-World War II campaign initiated by the American labor movement to unionize industrial workers in the southern United States.

Marshall Plan

A U.S. program providing aid to Western Europe following the devastation of World War II, aimed at rebuilding war-torn regions, removing trade barriers, and modernizing industries to prevent the spread of communism.

McCarthyism

A period of intense anti-communist suspicion in the United States during the early 1950s, characterized by Senator Joseph McCarthy's investigations and accusations without substantiated evidence.

Totalitarianism

A form of government in which the state holds total authority over society and seeks to control all aspects of public and private life whenever possible.