A Lease Where the Lessee Has the Option to Purchase

question 43

Multiple Choice

A lease where the lessee has the option to purchase the asset at the end of the lease for a set price that is set upfront in the lease contract is called a:

• A)fixed price lease.
• B)$1.00 out lease.
• C)fair market value lease.
• D)fair market value cap lease.

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Definitions:

Soft Rationing

The situation that occurs when units in a business are allocated a certain amount of financing for capital budgeting.

Hard Rationing

The situation that occurs when a business cannot raise financing for a project under any circumstances.

Hard Capital Rationing

A situation where a company is unable to secure additional funding from external sources like equity or debt markets.

NPV Projects

Projects evaluated using the Net Present Value method, which calculates the difference between the present value of cash inflows and outflows over a period.