You Work for a Nuclear Research Laboratory That Is Contemplating

question 28

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 $2.2 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 $600,000 per year for 4 years.Assume your company does not contemplate paying taxes for the next several years.You can borrow at 6 percent before taxes.What is the net advantage to leasing from your company's standpoint?

• A)$82,711
• B)$120,937
• C)$121,409
• D)$122,818
• E)$128,315

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Definitions:

Macula Lutea

A small, yellowish central area of the retina that is rich in cones and mediates clear, detailed vision.

Anterior Cavity

A body cavity that includes the thoracic, abdominal, and pelvic cavities; it houses and protects the body's internal organs.

Posterior Cavity

A body cavity located towards the back of the human body, housing the brain and spinal cord within its cranial and spinal subdivisions.

Conjunctiva

The thin, transparent membrane lining the inner surface of the eyelid and covering the white part of the eyeball.