R&S is considering either leasing or buying some new equipment. The lease payments would be $9,500 a year. The purchase price is $31,000. The equipment has a 3-year life after which it is
Expected to have a resale value of $4,500. Your ﬁrm uses straight-line depreciation, borrows
Money at 8.5 percent, and has a 35 percent tax rate. What is the after-tax salvage value of the
Equipment?
A) $2,857
B) $2,925
C) $3,333
D) $6,075
E) $6,923

Question

Quizplus · Accepted Answer

The Answer of R&S is considering either leasing or buying some new equipment. The lease payments would be $9,500 a year. The purchase price is $31,000. The equipment has a 3-year life after which it is
Expected to have a resale value of $4,500. Your ﬁrm uses straight-line depreciation, borrows
Money at 8.5 percent, and has a 35 percent tax rate. What is the after-tax salvage value of the
Equipment?
A) $2,857
B) $2,925
C) $3,333
D) $6,075
E) $6,923

R&S Is Considering Either Leasing or Buying Some New Equipment