In Valuing the Lease Versus Purchase Option, the Relevant Cash

question 19

Multiple Choice

In valuing the lease versus purchase option, the relevant cash flows are the:

• A)tax shield from depreciation.
• B)investment outlay for the equipment.
• C)a decrease in the firm's operating costs that are not affected by leasing.
• D)All of the above are relevant.
• E)None of the above are relevant.

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Definitions:

Accountant

A professional who performs financial functions related to the collection, accuracy, recording, analysis, and presentation of a business, non-profit organization, or individual's financial operations.

Accumulated Depreciation

The cumulative amount of a physical asset's value that has been accounted for as depreciation since the asset was first utilized.

Partnership Investment

A contribution of assets by a partner to a partnership, often in exchange for a share of the partnership's profits.

Equipment

Assets used in the operation of a business or manufacturing process, which have a long-term use and value.