Afarmer is considering the purchase or lease of a forklift. he can buy a new forklift or lease a new forklift. he believes that each forklift will provide the same service but the costs are different. he has provided the following information. inflation is assumed to be zero. assume that the lease payment is constant throughout the lease agreement. assume that the lease payment would be made at the beginning of the year and the lease ends at the end of the 10th year. the lessor will pay repairs and maintenance. also assume that this farmer could claim the tax deduction due to the lease payment when it is paid. the new forklift has a price of $11,400, a before-tax net return of -$6,100, an investment life of 10 years, and a terminal value of $8,000. if he was to lease the forklift the operating expenses for this tractor will be $3,500. suppose that the pre-tax rate of return is 6%, the marginal tax rate is 24%, and the irs allows him to depreciate the tractor over 14 years using the straight-line method. what is the npv of the purchased forklift?

Jennifer purchased a house in a brand new development in the outskirts of town. when her house was built, the nearest fire department was nearly 20 miles away. as her neighborhood developed, the density of the community called for a new fire department 1.5 miles away. what effect will the new fire station have on her homeowners insurance premium? a. a new fire department will be more demanding on local taxes. her annual premium will go up. b. the location of a fire department has no bearing on the value of her house. her annual premium will stay the same. c. the new fire department will reduce the risk of financial loss in her home. her annual premium should decrease. d. with a fire department so close (less than 5 miles), financial risk on jennifer’s home practically disappears. she will not need to pay insurance anymore.

Which statement best explains the relationship between points a and b? a. consumption reaches its highest point, and then supply begins to fall. b. inflation reaches its highest point, and then the economy begins to expand. c. production reaches its highest point, and then the economy begins to contract. d. unemployment reaches its highest point, and then inflation begins to decrease.

Suppose you win a small lottery and have the choice of two ways to be paid: you can accept the money in a lump sum or in a series of payments over time. if you pick the lump sum, you get $2,950 today. if you pick payments over time, you get three payments: $1,000 today, $1,000 1 year from today, and $1,000 2 years from today. 1) at an interest rate of 6% per year, the winner would be better off accepting the (lump sum / payments over time), since it has the greater present value. 2) at an interest rate of 9% per year, the winner would be better off accepting the (lump sum / payments over time), since it has the greater present value. 3) years after you win the lottery, a friend in another country calls to ask your advice. by wild coincidence, she has just won another lottery with the same payout schemes. she must make a quick decision about whether to collect her money under the lump sum or the payments over time. what is the best advice to give your friend? a) the lump sum is always better. b) the payments over time are always better. c) it will depend on the interest rate; advise her to get a calculator. d) none of these answers is good advice.