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

question 43

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:

Marginal Analysis

An examination of the additional benefits of an activity compared to the additional costs incurred by that same activity.

Extra Benefit

The additional advantage or value received from consuming one more unit of a good or service.

Study Economics

The academic pursuit focused on understanding how goods and services are produced, distributed, and consumed, and how wealth is transferred.

Information Costly

A term expressing that obtaining, processing, and interpreting information incurs costs, influencing economic behaviors and market efficiencies.