Assume that a piece of leased equipment has a relatively high expected residual value.From the lessee's viewpoint,it might be better to own the asset rather than lease it because with a high residual value the lessee will likely face a higher lease rate.

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A high expected residual value typically results in a lower lease rate because the lessor anticipates recouping a significant portion of the asset's cost upon its sale at the end of the lease term, thereby reducing the lessee's payment obligations.

Assume That a Piece of Leased Equipment Has a Relatively