If a Financial Lease Analysis Shows a NPV of $1,750

question 24

Multiple Choice

If a financial lease analysis shows a NPV of $1,750 that means:

• A)it will cost the lessee $1,750 more to lease.
• B)it will cost the lessee $1,750 more to own.
• C)the lessee will have to put down $1,750 as a lease deposit.
• D)the lessor should raise his annual lease payments by $1,750.

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Definitions:

Sales

The total amount of income generated by the selling of goods or services by a company during a certain period.

Manufacturing Costs

Refers to the total expenses incurred in the process of producing a product, including raw materials, labor, and overhead costs.

Variable Costing

An accounting method that only includes variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, treating fixed costs as period expenses.

Absorption Costing

An accounting method that includes all manufacturing costs (direct costs, fixed, and variable overheads) in the cost of a product.