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Question
A firm can either lease or buy some equipment costing $72,900. The lease payments would be $18,500 a year for four years. The equipment has a 4-year life after which it is expected to have a resale value of $3,600. The firm uses straight-line depreciation over the life of the asset, borrows money at 11 percent, and has a tax rate of 21 percent. The company does not expect to owe any taxes for at least four years because of its operating losses. What is the incremental cash flow for Year 3 if the company decides to lease rather than purchase the equipment?
A) −$29,165
B) −$21,821
C) −$18,500
D) −$18,559
E) −$17,635
Answer
This answer is hidden. It contains 37 characters.
Related questions
Q:
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B) Exit strategy is a key consideration when selecting a venture capitalist.
C) Venture capitalists limit their services to providing money to start-up firms.
D) Most venture capitalists are long-term investors in the companies they finance.
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Q:
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Q:
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E) decreases net fixed assets, net income, and operating cash flows.
Q:
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E) Standard Accounting Value Guidelines
Q:
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B) current liabilities minus shareholders' equity.
C) fixed assets minus long-term liabilities.
D) total assets minus total liabilities.
E) current assets minus current liabilities.
Q:
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B) The NYSE is the largest dealer market for listed securities in the United States.
C) The listing requirements for the NYSE are more stringent than those of NASDAQ.
D) Any corporation desiring to be listed on the NYSE can do so for a fee.
E) The NYSE is an OTC market functioning as both a primary and a secondary market.
Q:
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A) Stock options
B) Promotion
C) Sarbanes-Oxley Act
D) Agency play
E) Proxy fight
Q:
Agency problems are most associated with:
A) sole proprietorships.
B) general partnerships.
C) limited partnerships.
D) corporations.
E) limited liability companies.
Q:
The Sarbanes-Oxley Act of 2002 holds a public company's ________ responsible for the accuracy of the company's financial statements.
A) managers
B) internal auditors
C) external legal counsel
D) internal legal counsel
E) Securities and Exchange Commission agent
Q:
Decisions made by financial managers should primarily focus on increasing the:
A) size of the firm.
B) growth rate of the firm.
C) gross profit per unit produced.
D) market value per share of outstanding stock.
E) total sales.
Q:
A partnership with four general partners:
A) distributes profits based on percentage of ownership.
B) has an unlimited partnership life.
C) limits the active involvement in the firm to a single partner.
D) limits each partner's personal liability to 25 percent of the partnership's total debt.
E) must distribute 25 percent of the profits to each partner.
Q:
The primary advantage of being a limited partner is:
A) the receipt of tax-free income.
B) the partner's active participation in the firm's activities.
C) the lack of any potential financial loss.
D) the daily control over the business affairs of the partnership.
E) the partner's maximum loss is limited to their capital investment.
Q:
Which one of the following statements concerning a sole proprietorship is correct?
A) A sole proprietorship is designed to protect the personal assets of the owner.
B) The profits of a sole proprietorship are subject to double taxation.
C) The owner of a sole proprietorship is personally responsible for all of the company's debts.
D) There are very few sole proprietorships remaining in the U.S. today.
E) A sole proprietorship is structured the same as a limited liability company.
Q:
Which one of the following questions is least likely to be addressed by financial managers?
A) How should a product be marketed?
B) Should customers be given 30 or 45 days to pay for their credit purchases?
C) Should the firm borrow more money?
D) Should the firm acquire new equipment?
E) How much cash should the firm keep on hand?
Q:
An example of a capital budgeting decision is deciding:
A) how many shares of stock to issue.
B) whether or not to purchase a new machine for the production line.
C) how to refinance a debt issue that is maturing.
D) how much inventory to keep on hand.
E) how much money should be kept in the checking account.
Q:
Individual investors might avoid requesting 100 shares in an upcoming IPO because they:
A) do not want to be bothered with submitting their bid to the SEC for approval.
B) do not want to abide by the quiet period requirement.
C) are prevented from entering orders for less than 1,000 shares.
D) are more apt to receive shares if the IPO is under allocated.
E) would have to pay a premium based on their small order size.