1.

Your firm is considering leasing a radiographic x-ray machine. The lease lasts for 3 years. The lease calls for 4 payments of $25,000 per year with the first payment occurring immediately. The computer would cost $140,000 to buy and would be straight-line depreciated to a zero salvage value over 3 years. The actual salvage value is negligible. The firm can borrow at a rate of 12%. The corporate tax rate is 40%.

What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in years 1-3?

Group of answer choices

-$1,500

-$15,000

-$33,667

None of the rest

-$2,750

2.

Your firm is considering leasing a new radiographic device. The lease lasts for 3 years. The lease calls for 4 payments of $25,000 per year with the first payment occurring immediately. The computer would cost $140,000 to buy and would be straight-line depreciated to a zero salvage value over 3 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 12%. The corporate tax rate is 40%.

What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in years 1-3?

Group of answer choices

-$1,200

None of the rest

-$1,577

-$13,000

-$3,667