Leasing Is Typically a Financing Decision and Not a Capital

question 6

True/False

Leasing is typically a financing decision and not a capital budgeting decision.Thus,the availability of lease financing cannot affect the size of the capital budget.

---

Definitions:

Interest Tax Shield

A lowered income tax obligation stemming from approved deductions on interest expenses.

Levered Firm

A company that uses debt (loans or bonds) in addition to equity in its financing structure, often leading to higher risk and potentially higher returns.

M&M Proposition I

A theory in corporate finance suggesting that in a perfect market, the value of a firm is unaffected by how it is financed, regardless of the debt-to-equity ratio.

Unlevered Cost of Capital

The cost of capital for a company that has no debt, reflecting the risk of investing in the company's equity alone.