In Computing the Present Value of the Minimum Lease Payments

question 6

Multiple Choice

In computing the present value of the minimum lease payments, the lessee should

• A)use its incremental borrowing rate in all cases.
• B)use either its incremental borrowing rate or the implicit rate of the lessor, whichever is higher, assuming that the implicit rate is known to the lessee.
• C)use either its incremental borrowing rate or the implicit rate of the lessor, whichever is lower, assuming that the implicit rate is known to the lessee.
• D)None of these answer choices are correct.

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