Use the Table for the Question(s)below

question 57

Multiple Choice

Use the table for the question(s) below.
Danby Construction is considering leasing a new crane for the next 5 years.Danby has created the following table of cash flows to help with the decision:

-Danby Construction has decided to lease a new crane for the next 5 years.The purchase price of the crane is $545,000,and the working life of the crane is 10 years.The crane falls under asset class 43 and has a capital cost allowance (CCA) rate of 30%.Assume disposal for $0 at the beginning of year 6.If leased,the annual lease payments will be $80,000 per year for five years,and it is a true tax lease.Assume the tax savings occur at the end of each year.If Danby's borrowing cost is 9%,and its tax rate is 30%,what is the NPV of leasing versus borrowing?

• A)$308,968
• B)$175,382
• C)$289,618
• D)$156,032
• E)-$98,405

---

Definitions:

Doctrine of Strict Liability

A legal principle that holds a party responsible for damages or loss, regardless of fault, in specific circumstances.

Mere Bystander

An individual who is present at an event or incident but does not take any part in it.

Original Purchaser

The first party to buy a product or service directly from the supplier or manufacturer.

Warnings

Notices given to consumers or users about the potential risks or dangers associated with a product or service to mitigate liability.