If a Lessor Borrows Money on a Nonrecourse Basis to Purchase

question 66

Multiple Choice

If a lessor borrows money on a nonrecourse basis to purchase an asset which will be leased to another party, then:

• A) The lessor is responsible for the payments on the borrowed funds whether or not the lessee pays the lease payments.
• B) The lessee is required to send the lease payments directly to the lender of the funds as payment on the loan to the lessor.
• C) The loan is considered paid in full if the lessee discontinues making the lease payments or terminates the lease early.
• D) The lessor is only obligated to make loan payments as long as the lessor is collecting the lease payments.
• E) The lessor must pursue the lessee if the lessee fails to make the agreed upon lease payments.

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Definitions:

Break Even

The point at which total cost and total revenue are equal, resulting in no net loss or gain for a business.

Total Return

The overall financial gain or loss on an investment, including both capital appreciation and income received.

Income Received

Refers to the total amount of money or assets that an individual or entity receives over a certain period, including wages, dividends, sales proceeds, or benefits.

Annual R&D

Refers to the yearly research and development expenses undertaken by a company to innovate and improve its products or services.