Precision Tool Is Trying to Decide Whether to Lease or Buy

question 72

Multiple Choice

Precision Tool is trying to decide whether to lease or buy some new equipment for its tool and die operations.The equipment costs $1.2 million has a 7-year life,and will be worthless after the 7 years.The pre-tax cost of borrowed funds is 8 percent and the tax rate is 32 percent.The equipment can be leased for $242,500 a year.What is the net advantage to leasing?

• A)-$51,566
• B)-$34,211
• C)$37,549
• D)$56,828
• E)$79,664

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Definitions:

Confirmation Bias

The inclination to seek out, interpret, prefer, and remember information in a manner that affirms one's already held beliefs or theories.

Analytic Intelligence

A facet of intelligence theorized by Robert Sternberg as part of his Triarchic Theory of Intelligence, involving the ability to analyze and evaluate ideas, solve problems, and make decisions.

Triarchic Theory

A theory of intelligence proposed by Robert Sternberg, emphasizing analytical, creative, and practical aspects.

Morpheme

The smallest grammatical unit in a language that carries semantic meaning, which cannot be further divided without losing or altering its meaning.