Which Rate Should You Use to Discount the Leasing Cash

question 14

Multiple Choice

Which rate should you use to discount the leasing cash flows in an NPV analysis?

• A)WACC
• B)market interest rate
• C)cost of debt
• D)internal rate of return

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Definitions:

Operating Leverage

A measure of the relative mix of a business’s variable costs and fixed costs, computed as contribution margin divided by operating income.

Highly Automated Industries

Sectors that rely extensively on automation and machinery to produce goods or deliver services with minimal human intervention.

Operating Leverage

The degree to which a firm or project can increase operating income by increasing revenue, a measure of how revenue growth translates into growth in operating income.

Operating Income

This income represents the profit from a company's core business operations, excluding the deduction of interest and taxes.