If a Lease Analysis Shows Exactly the Same Present Value

question 62

Multiple Choice

If a lease analysis shows exactly the same present value as an equivalent loan, the lessee should:

• A)Choose to lease or buy based on other criteria
• B)Lease, since there are more tax shelters
• C)Buy, because the salvage might be bigger than estimated
• D)Neither lease nor buy, since the asset choice is clearly wrong

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Definitions:

Bound

In legal terms, it refers to being legally or ethically obligated to do something.

Declare And Distribute

The process by which a company announces and then allocates dividends to its shareholders.

Dividends

Payments made by a corporation to its shareholder members, derived from the company's profits.

Excess Solvency

refers to the situation where a company holds significantly more assets or financial reserves than the minimum required by regulators to cover its liabilities and potential claims.