Canada Lease Co

question 28

Multiple Choice

Canada Lease Co.is considering switching from using operating leases to financial leases.The expected impact on its stock price is:

• A) the price should fall as the earnings per share will decline.
• B) the price should not change as the ROA does not change.
• C) the price should not change as the total cash flows will not change.
• D) the price should rise as the cash flow from operations will rise.

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Definitions:

Collusive Agreements

Secret or illegal cooperation or conspiracy, especially between competing entities, to cheat or deceive others.

Monopolist

A market participant, individual, or company that holds exclusive control over the supply of a particular good or service, potentially manipulating prices.

Competitive Price-Searcher

A market structure where firms have some control over the price because their products are differentiated, and consumers search for the best prices among competitors.

Long-Run Economic Profit

The excess revenue over costs, including opportunity costs and explicit costs, that a firm realizes when all inputs are considered variable, typically assumed in a period where firms can enter or exit the industry.