A Financial Lease Is Also Called a Full-Payout Lease Because

question 71

Multiple Choice

A financial lease is also called a full-payout lease because:

• A)Lessee agrees to pay the full amount of the lease up front
• B)Lessor agrees to pay out the lease if the lessee defaults
• C)Lessee pays for full cost of the asset in present value terms
• D)Payout of the lease is guaranteed by insurance

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance, remaining constant regardless of the business activity.

AVC

Average Variable Cost is the total variable costs divided by the quantity of output, representing the variable cost per unit of output.

MC = MR

An economic principle stating that to maximize profits, firms should produce up to the point where marginal cost equals marginal revenue.

MC = MR

The principle that profit maximization occurs when a firm's marginal cost (MC) equals its marginal revenue (MR).