Bavarian Brew Lease Bavarian Brew Wants to Lease a New Bottling Machine. the Bottling

question 66

Multiple Choice

Bavarian Brew Lease
Bavarian Brew wants to lease a new bottling machine. The company obtains a 10 year lease requiring annual payments of $15,000 at the beginning of the year. The firm is expected to exercise its option to purchase the machine at the termination of the lease for $10,000 at the end of year 10. The company is in the 35% tax bracket.
-Bavarian Brew has also the option to purchase the machine.If the present value of the cash flows associated with the purchase is $78,000,what is the net present value of the lease option? Assume that the company's cost of debt is 7%.

• A) $8,870
• B) -$8,870
• C) $7,950
• D) -$7,950

Understand the implications of errors and fraud on financial statements and the difference between them.

Know the best practices for managing and documenting cash transactions to maintain effective control.

Recognize the significance of prenumbering documents and its impact on tracking financial transactions.

Understand the process and purpose of bank reconciliations in managing cash balances.

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