Which One of the Following Statements Is Correct Concerning Taxes

question 42

Multiple Choice

Which one of the following statements is correct concerning taxes and leasing?

• A)Tax-deferral is a legitimate reason for leasing.
• B)The lessee should be the party with the higher tax bracket.
• C)Generally speaking, lessors tend to benefit from leases while lessees do not.
• D)If a firm has significant net operating losses, it should be the lessor in a lease.
• E)You should only lease an asset if the lease will be fully amortized.

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Definitions:

Equity Beta

A measure of the volatility, or systematic risk, of an individual stock in comparison to the market as a whole.

Debt Beta

A measure of the risk associated with the debt portion of a company’s capital structure, compared to the market as a whole.

Corporate Taxes

Government levies on the earnings or profits generated by businesses.

Personal Tax Rate

The percentage of one's income that is paid to the government in taxes, which varies based on income level and jurisdiction.