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:

Charitable Nonprofits

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Endorsing Candidates

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Form 5768

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Nonprofit Organization

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