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:

Domestic Investment

The total amount of money that is invested within a country's borders by both public and private entities.

Real Exchange Rate

The rate at which a person can exchange the currency of one country for goods and services of another country, adjusted for price level differences.

Euros

The authorized monetary unit of the eurozone, adopted by 19 out of the 27 member states of the European Union.

Exchange Rate

The value of one currency for the purpose of conversion to another, determining how much of one currency can be exchanged for another currency.