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T4 Enterprises develops sophisticated communications equipment for government and commercial use. It is organized into two divisions, which are evaluated as investment centers. The cost of capital used in evaluating the divisions is 12 percent.
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Question a. Suppose the manager of GD is evaluated using return on investment (ROI). Will she prefer to lease or purchase the technology?
Question b. Suppose the manager of GD is evaluated using residual income. Will she prefer to lease or purchase the technology? (Enter your answer in thousands of dollars.)
Question c. Suppose the manager of GD is evaluated using return on investment (ROI). What is the lease payment that would make the manager indifferent between leasing and purchasing the technology? (Enter your answer in thousands of dollars. Round your intermediate calculation to 2 decimal places. Round your final answer to the nearest whole dollar amount.)
Question d. Suppose the manager of GD is evaluated using residual income. What is the lease payment that would make the manager indifferent between leasing and purchasing the technology? (Enter your answer in thousands of dollars. Round your final answer to the nearest whole dollar amount.)
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