If a Lease Analysis Shows Exactly the Same Present Value

question 1

Multiple Choice

If a lease analysis shows exactly the same present value as an equivalent loan, the lessee should:

• A)choose to lease or buy based on other criteria.
• B)lease, since there are more tax shelters.
• C)buy, because the salvage might be bigger than estimated.
• D)neither lease nor buy, since the asset choice is clearly wrong.

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Definitions:

Normal Distribution

A balanced probability distribution around the mean, demonstrating that occurrences are more frequent near the mean than away from it.

Margin of Error

An indicator of the precision of an estimate in statistics, showing the range within which the true value is expected to lie with a certain level of confidence.

Confidence Interval

A range of values that is used to estimate the true value of a population parameter with a certain level of confidence.

Standard Deviation

An index used to assess the extent of variation or scatter among data points.