Which of the Following Statements Is False

question 55

Multiple Choice

Which of the following statements is false?

• A) We can compare leasing to buying the asset using equivalent leverage by discounting the incremental cash flows of leasing versus buying using the after-tax borrowing rate.
• B) A non-tax lease is attractive if it offers a better interest rate than would be available with a loan.
• C) Evaluating a true tax lease is much more straightforward than evaluating a non-tax lease.
• D) To determine whether a non-tax lease offers a better rate, we discount the lease payments at the firm's pre-tax borrowing rate and compare it to the purchase price of the asset.

---

Definitions:

Variable

An element, feature, or factor that is liable to vary or change.

Option Vega

A measure of an option's sensitivity to changes in the volatility of the underlying asset, indicating how much the option's price is expected to move per 1% change in volatility.

Standard Deviation

The measure indicating the amount of variation or spread in a set of data points relative to its mean.

Underlying Asset

The financial instrument (such as a stock, bond, commodity, or currency) upon which a derivative's value is based.