Your Firm Is Considering Leasing a New Computer

question 15

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 would the after-tax cash flow in year 9 be if the asset had a residual value of $500 (ignoring any possible risk differences) ?

• A)$-605
• B)$-955
• C)$-1,455
• D)$-1,305
• E)None of the above

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Definitions:

Injunctive Norms

Social norms that are perceived as approved or disapproved behaviors by a cultural or social group, guiding individuals on what they ought to do.

Focus Theory

An approach in psychology that examines how individuals concentrate their attention or energy on specific thoughts, tasks, or goals and the impact of this focus on behavior and cognition.

Social Contagion

The spread of ideas, attitudes, or behaviors through a group or society via social influence, similar to the transmission of infectious diseases.

Informational Influence

The effect on an individual's behavior or opinions due to the desire to be correct, often resulting from the acceptance of information from others as evidence about reality.