Since salvage is more risky than other lease analysis cash flows, it is logical, though not always practical, to use a higher discount rate for salvage in present value calculations in such analysis.

Question

Quizplus · Accepted Answer

This statement is true because salvage value is typically uncertain and may not be realized at the time of disposition. Therefore, a higher discount rate may be used to account for the additional risk associated with salvage cash flows in lease analysis.

Since Salvage Is More Risky Than Other Lease Analysis Cash