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Daily Enterprises is contemplating the acquisition of some new equipment. The purchase price is $33,000. The equipment has a 4-year life. The company expects to sell the equipment at the end of year 4 for $7,000. 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 $9,000 a year. The firm can borrow money at 7 percent and has a 35 percent tax rate. What is the incremental annual cash flow for year 4 if the company decides to lease the equipment rather than purchase it?

A) $-6,574

B) $-11,256

C) $-10,800

D) $-14,132

E) $-5,780

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91600774

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