Which of the Following Statements Is False

question 11

Multiple Choice

Which of the following statements is false?

• A) Absent market imperfections, leases represent another form of zero-NPV financing available to a firm, and the Modigliani-Miller propositions apply: Leases neither increase nor decrease firm value, but serve only to divide the firm's cash flows and risks in different ways.
• B) In a perfect market, the cost of leasing is equivalent to the cost of purchasing and reselling the asset.
• C) Each lease agreement can be tailored to fit the precise nature of the asset and the needs of the parties at hand.
• D) Features of leases will be priced as part of the lease payment. Terms that give valuable options to the lessee lower the amount of the lease payments, whereas terms that restrict these options will raise them.

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Definitions:

Supply Schedule

A table or graph showing the quantity of a good that producers are willing and able to supply at different prices.

Tax Rate

The rate at which taxes are levied on an individual or a company's income.

Supply Elasticity

A measure of how much the quantity supplied of a good responds to a change in price, indicating the good's price sensitivity on the supply side.

Price Elasticity

The extent to which price adjustments impact the quantity of a good that consumers want to buy.