If an Equivalent Loan Has the Same Cash Flows as a Lease

question 96

Multiple Choice

If an equivalent loan has the same cash flows as a lease, and results in a $1,500 higher present value, one could conclude that: present value than the lease analysis indicated, this shows:

• A)that leasing is preferable to buying the asset, since owning costs $1,500 more.
• B)that either is acceptable, since the cash flows are the same.
• C)one should not lease.
• D)that owning will require more capital up front.

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Definitions:

Little Rock

Capital city of the state of Arkansas, historically noted for the 1957 desegregation crisis at Little Rock Central High School, which became a landmark in the civil rights movement.

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The 17th President of the United States, who served from 1865 to 1869, following the assassination of Abraham Lincoln.