When Computing the Rate of Return from Selling an Investment

question 118

Multiple Choice

When computing the rate of return from selling an investment, the number of years between the present and future cash flows is an important factor in determining

• A) the annual rate earned.
• B) the annual payments required.
• C) whether the present value or the future value is a cash inflow.
• D) whether the present value or the future value is a cash outflow.

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Definitions:

Financial Lease

A type of lease where the lessee pays for an asset over a period of time, and at the end of the lease term the asset typically becomes the lessee's property.

Lessor

The entity in a lease agreement that possesses the asset and allows the lessee to utilize the asset in return for payments of rent.

Break-Even Lease Payment

The break-even lease payment is the lease payment at which the cost of leasing equals the cost of owning, neither gaining nor losing financially over the term of the lease.

CCA Class

In tax terminology, specifically for Canadian taxation, a system categorizing business assets for the purpose of depreciation calculation.