Which of a firm's rates listed below is the appropriate one to use to evaluate the lease-or-purchase question?
A) Its long-term after-tax rate of raising debt
B) Its short-term before-tax rate of interest
C) Its long-term before-tax rate of raising debt
D) Its long-term rate of return on equity

Question

Quizplus · Accepted Answer

The appropriate rate to use in evaluating the lease-or-purchase decision is the firm's long-term after-tax rate of raising debt, as it reflects the cost of financing the asset over the long term and considers the tax implications.

Which of a Firm's Rates Listed Below Is the Appropriate