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Dakota Trucking Company (DTC) Is Evaluating a Potential Lease for a Truck

question 20

Multiple Choice

Dakota Trucking Company (DTC) is evaluating a potential lease for a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year class. If the firm borrows money to buy the truck, the loan rate would be 10%, and the loan would be amortized over the truck's 4-year life, so the interest expense for taxes would decline over time. The loan payments would be made at the end of each year. The truck will be used for 4 years, at the end of which time it will be sold at an estimated residual value of $10,000. If DTC buys the truck, it would purchase a maintenance contract that costs $1,000 per year, payable at the end of each year. The lease terms, which include maintenance, call for a $10,000 lease payment (4 payments total) at the beginning of each year. DTC's tax rate is 40%. Should the firm lease or buy? (Note: Depreciation rates for Years 1 to 4 are 0.33, 0.45, 0.15, and 0.07.)

Understand the application of the Commerce Clause in the regulation of business activities.

Recognize the use of federal spending power to achieve social welfare objectives.

Understand the constitutional protections afforded to political and commercial speech.

Comprehend how the Constitution and its amendments impact government regulation of business and protect individual rights.

Definitions:

Motivational Interviewing

A counseling approach designed to enhance an individual's motivation towards making positive changes in their behavior, emphasizing empathy and understanding.

Empathy

The ability of the therapist to understand the feelings of the client.

Self-efficacy

An individual's belief in their own capability to execute behaviors necessary to produce specific performance attainments.

Ideal Self

A person's conception of how they would like to be, often serving as a motivation for self-improvement.