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:

Land Improvements

Enhancements made to land such as landscaping, fencing, and lighting that increase its value, excluding the cost of the land itself.

Buildings

Physical structures owned or used by a business for its operations, considered as a fixed asset on the balance sheet.

Machinery and Equipment

Long-term assets used in the operation of a business, typically for manufacturing, processing, or office operations.

Land

A natural resource that refers to the earth's surface not covered by water, which can be used for agriculture, construction, or as an investment.