If a lease analysis shows exactly the same present value as an equivalent loan, the lessee should:
A)choose to lease or buy based on other criteria.
B)lease, since there are more tax shelters.
C)buy, because the salvage might be bigger than estimated.
D)neither lease nor buy, since the asset choice is clearly wrong.

Question

Quizplus · Accepted Answer

If the lease analysis shows exactly the same present value as an equivalent loan, it means that the cost of leasing and buying are the same. Therefore, the lessee should base their decision on other criteria such as cash flow, risk, flexibility, and tax implications. This decision should not be solely based on the present value analysis.

If a Lease Analysis Shows Exactly the Same Present Value