Quiz Ch 25 – Sensible Reasons for Leasing
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
Which statements offer valid reasons for leasing?
Which statements offer valid reasons for leasing?
True or false: Unveiling the distinctive aspect of sale and lease-back, the firm sells an owned asset and then enters into a lease agreement to reacquire its use.
True or false: The evaluation of financial leases involves the discounting of lease cash flows using the company’s Weighted Average Cost of Capital (WACC).
True or false: Achieving optimal leasing benefits occurs when the lessor’s tax rate is markedly higher than that of the lessee.
True or false: A financial lease, characterized by its short-term and cancelable nature, stands in contrast to an operating lease, which is long-term and noncancelable.
True or false: In the lease versus buy decision, opt for purchasing if equivalent annual costs exceed external rates.
True or false: A practical rationale for leasing is the convenience offered by short-term lease arrangements.
True or false: The assertion that leasing preserves capital presents a dubious rationale.
True or false: In the face of financial distress, a lessee may explore renegotiating the lease, aiming for a reduction in payment terms accepted by the lessor.
True or false: Within a leveraged lease structure, the lessee secures funds through borrowing, which are then employed to cover lease payments.