The WACC Is Not Used in the Lease Versus Purchase

question 30

Multiple Choice

The WACC is not used in the lease versus purchase decision because:

• A) the WACC was used in the decision to acquire the asset, this is only a financing decision.
• B) the WACC is used only when a lease alone is considered and not a lease versus purchase.
• C) the WACC does not include the lease cost of capital and therefore should not be used.
• D) tax rates of the lessor may be different than the lessee and therefore the WACC is incorrect.

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Definitions:

Motor Reproduction

In the context of social learning theory, it refers to the physical ability to replicate the observed actions of a model.

Observational Learning

A learning process whereby individuals acquire new behaviors by watching and imitating others.

Attention

The cognitive process of selectively concentrating on one aspect of the environment while ignoring other things.

Retention

The ability to store and recall information or experiences over time in one's memory.