Question 57 Your company is considering the purchase of a fleet of cars for $200

Question

Question 57

Your company is considering the purchase of a fleet of cars for $200,000. It can borrow at 6%. The cars will be used for four years. At the end of four years they will be worthless. You call a leasing agent and find that the cars can be leased for $55,000 per year. The corporate tax rate is 34% and the cars belong in CCA class 10 (a 30% class), what is the net advantage to leasing?

Select one:

a. $5,399

b. $1,802

c. $3,434

d. $3,961

e. $1,134

Question 58

In most industries, planning beyond the period of one year is not very useful.

Select one:

True

False

Question 59

Diversification will NOT reduce the market risk of your portfolio.

Select one:

True

False

Question 60

Generally, bankruptcy costs have no impact on a firm’s decision to increase debt financing.

Select one:

True

False

Explanation / Answer

Ans 58 False, In most industries , company should plan looking the long term goals.

Ans 59 False, Diversification reduces market risk.

Ans 60 False, As more debt is raised bankcrupcy cost increases and thus it impacts debt financing.

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