Why Is Face Validity Sometimes Important

question 17

Short Answer

Why is face validity sometimes important?

---

Definitions:

Capital Lease

A lease agreement in which the lessee records the leased asset as an asset in its balance sheet, and the lease payment obligations as liabilities.

Incremental Borrowing Rate

The interest rate a lessee would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments.

Implicit Interest Rate

The rate of interest implied in the lease payments or in other financial arrangements, not explicitly stated.

Residual Value

The estimated value of an asset at the end of its lease term or useful life.