Question
Delgado's is considering leasing a new computer. The lease terms include five annual payments of $2,300 with the first payment occurring when the lease is
Delgado's is considering leasing a new computer. The lease terms include five annual payments of $2,300 with the first payment occurring when the lease is signed. The computer would cost $11,500 to buy and would be depreciated straight-line to a zero salvage value over 5 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 6 percent and has a tax rate of 21 percent. What is the cash flow from leasing relative to purchasing in Year 4?
A. -$2,300
B. -$1,817
C. -$483
D. -$1,334
E. -$2,783
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