With a Standard Loan We Are Financing ________,With a Lease

question 33

Multiple Choice

With a standard loan we are financing ________,with a lease we are financing only ________ of the asset during the term of the lease.

• A) the cost of the economic depreciation of the asset; the entire cost
• B) the cost of the economic depreciation of the asset; a portion
• C) only a portion of the asset; the cost of the economic depreciation
• D) the entire cost of the asset; the cost of the economic depreciation

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Definitions:

Cost of Retained Earnings

The rate of return that shareholders expect on the earnings that a company keeps and reinvests in its operations.

Risk Premium

The extra return expected by an investor for holding a risky asset rather than a risk-free asset.

Flotation Costs

The costs incurred by a company in issuing new securities, including underwriting, legal, and registration fees.

Equity Capital

Funds raised by a company in exchange for shares of ownership in the company.