What Is the Implicit Rate

question 76

Multiple Choice

What is the implicit rate?

• A)The interest rate that the lessor would have to pay on a similar lease or loan.
• B)The interest rate that the lessee would have to pay on a similar lease or loan.
• C)The risk adjusted interest rate from the cash flow stream expected by the lessor.
• D)The risk adjusted interest rate from the cash flow stream expected by the lessee.

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Definitions:

Excess Capacity

The availability of more production capacity within a business than is currently needed to meet demand.

Special Order

An order for a product or service that is outside the company's normal scope of work, often requiring a unique set of costs and pricing.

Relevant Cost

Costs that are directly related to a specific business decision, affecting the future cash flows.

Relevant Benefits

The advantageous outcomes or gains that are directly attributable to a specific action or investment.