1. Your firm is considering leasing a new computer. The lease lasts for 8 years. The lease calls for 8 payments of $8,000 per year with the first payment occurring immediately. The computer would cost $50,000 to buy and would be straight-line depreciated to a zero salvage value over 8 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 5%. The corporate tax rate is 34%. What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in years 6?
-$595.00
-$8,000.00
-$9,195.00
-$7,405.00
None of the above
2. Merrimack stock is selling for $53 a share, the $50 puts are priced at $1.10, and the $50 calls are priced at $3.76. How much will you receive if you write fifteen $50 call option contracts?
$5,640.00
$6,788.00
$4,240.00
$1,960.00
$8,750.00