A Bargain Purchase Option in a Finance Lease Affects The

question 152

Multiple Choice

A bargain purchase option in a finance lease affects the:

• A)lessee's capitalized cost of the leased asset.
• B)incremental target rate of return.
• C)guaranteed residual value.
• D)dealer's profit in a sales-type lease.

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Definitions:

Externality

An outcome from economic action that affects people who are not directly involved, and this impact can be beneficial or harmful.

Economically Efficient

A state where resources are allocated in a way that maximizes the production of goods and services, with no way to improve someone's condition without worsening another's.

Coase Theorem

A principle stating that if property rights are well-defined and transaction costs are low, parties will negotiate to correct externalities without government intervention.

Transaction Costs

Expenses incurred during the process of buying or selling goods and services that are not directly related to their price.