Multiple Choice
Interstate Services needs some equipment costing $61,000.The equipment has a 4-year life after which it will be worthless.The firm uses MACRS depreciation which allows for 33.33 percent,44.44 percent,14.82 percent,and 7.41 percent depreciation over years 1 to 4,respectively.The equipment can be leased for $16,000 a year.The firm can borrow money at 7.5 percent and has a 36 percent tax rate.What is the incremental annual cash flow for year 2 if the company decides to lease the equipment rather than purchase it?
A) -$18,897
B) -$19,286
C) -$19,389
D) -$19,407
E) -$19,999
Correct Answer:
Verified
Correct Answer:
Verified
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