You Work for a Nuclear Research Laboratory That Is Contemplating

question 26

Multiple Choice

You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive,high-tech equipment) .The scanner costs $3.5 million and it would be depreciated straight-line to zero over 4 years.Because of radiation contamination,it will actually be completely valueless in 4 years.You can lease it for $875,000 per year for 4 years.Assume the tax rate is 33 percent.You can borrow at 10 percent before taxes.What is the net advantage to leasing from your company's standpoint?

• A)$468,216
• B)$491,319
• C)$516,007
• D)$530,468
• E)$541,747

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Definitions:

Birds of Feather

A phrase used to express the idea that similar people tend to associate with each other.

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A theory suggesting that individuals with complementary traits or characteristics are more likely to form a partnership.

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A social engagement between two persons who have not previously met, often arranged by a mutual acquaintance.

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The extent to which an individual's physical attributes are deemed attractive or lovely by people.