The WACC Is Not Used in the Lease Versus Purchase

question 52

Multiple Choice

The WACC is not used in the lease versus purchase decision because:

• A) the WACC was used in the decision to acquire the asset, this is only a financing decision.
• B) the WACC is used only when a lease alone is considered and not a lease versus purchase.
• C) the WACC does not include the lease cost of capital and therefore should not be used.
• D) tax rates of the lessor may be different than the lessee and therefore the WACC is incorrect.
• E) when a bank arranges a lease they do not consider the lessee's cost of capital.