Your Firm Is Considering Leasing a New Computer

question 49

Multiple Choice

Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of $1,000 per year with the first payment occurring immediately. The computer would cost $7,650 to buy and would be straight-line depreciated to a zero salvage value over 9 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 8%. The corporate tax rate is 30%.
-What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in years 1-9?

• A)$-255
• B)$-955
• C)$-1,295
• D)$-1,850
• E)None of the above

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Definitions:

Postmodernism

A broad movement that developed in the mid- to late-20th century across philosophy, the arts, architecture, and criticism, marked by a skepticism towards meta-narratives and ideologies.

Economic Basis

The underlying foundation or the main driving factor of an economy, typically referring to the way in which production, distribution, and exchange of goods and services are organized.

Unifying Features

Characteristics or elements that bring individuals or groups together, creating a sense of solidarity or cohesion.

Cultural Diffusion

The transmission of cultural elements from one society or cultural group to another.