You Are the Manager of a Sales Division

question 24

Multiple Choice

You are the manager of a sales division.You are considering leasing a fleet of cars for your staff.You can buy the cars for $300,000 or you can lease them for 8 years at $60,000 per end of year.The company faces a tax rate of 40 percent and a CCA rate of 10 percent on vehicles.If the company buys the cars and finances the purchase with a loan,they will pay 7 percent in interest.Assume that after the term of the lease is over,the salvage value of the cars will be zero.What is the NPV of the lease?

• A) $217,196
• B) $59,610
• C) -$23,194
• D) -$240,390

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Definitions:

Tenancy in Common

A form of co-ownership where each owner possesses a specific fraction of the property and can transfer their share independently.

Joint Tenancy

A form of property ownership where two or more individuals hold equal ownership rights and where the survivor(s) inherit(s) the other's share automatically upon death.

Obligation

A legal or moral duty to do or not do something, typically enforceable through legal mechanisms.

Noisy Tenants

Tenants who cause a disturbance by making excessive noise, leading to complaints from other residents or neighbors.