The WACC Is Not Used in the Lease Versus Purchase

question 30

Multiple Choice

The WACC is not used in the lease versus purchase decision because:

• A) the WACC was used in the decision to acquire the asset, this is only a financing decision.
• B) the WACC is used only when a lease alone is considered and not a lease versus purchase.
• C) the WACC does not include the lease cost of capital and therefore should not be used.
• D) tax rates of the lessor may be different than the lessee and therefore the WACC is incorrect.

Identify the characteristics of a firm's operational phase (short run or long run).

Calculate a firm's most efficient output.

Determine the minimum acceptable price for a firm in the long run to cover its costs.

Understand the concept and importance of variables in research.

---

Definitions:

Minimum Wage

The lowest legal hourly pay for workers, set by government law.

Quid Pro Quo

A Latin phrase meaning "something for something," which refers to a mutual exchange where one thing is given in return for another.

OSHA Inspectors

Officials tasked with enforcing safety and health regulations in workplaces, under the authority of the Occupational Safety and Health Administration.