National Event Coordinators Is Contemplating the Acquisition of a New

question 9

Multiple Choice

National Event Coordinators is contemplating the acquisition of a new tent that will be used for major outdoor events.The purchase price is $147,000.The firm uses MACRS depreciation which allows for 33.33 percent,44.44 percent,14.82 percent,and 7.41 percent depreciation over years 1 to 4,respectively.The tent will be worthless after four years.The tent can be leased for four years at $42,500 a year.The firm can borrow money at 7.5 percent and has a 34 percent tax rate.What is the net advantage to leasing?

• A)$1,789
• B)$1,862
• C)$1,922
• D)$2,087
• E)$2,127

---

Definitions:

Service Life

The estimated use period or duration over which an asset is expected to be economically usable by one or more users, with proper maintenance and repairs.

Operational Use

The application or employment of resources, processes, and procedures to perform its intended functions or tasks within a business.

Units Of Time

Standardized segments of time used for measuring duration, such as seconds, minutes, hours, days, months, and years.