As a practical matter, the lessee uses a single discount rate for lease analysis, but a more refined approach would do which of the following?
A)use a different discount rate for every line on the lease analysis' cash flows, and so reflect differing risk for each cash item.
B)use a zero discount rate for the lease payment, a high rate only for the CCA tax benefits, and a middle rate for the other cash flows.
C)use one discount rate for the lease tax shelter, and another for the other cash flows.
D)use a low, middle, and high discount rate and pick the average result.

Question

Quizplus · Accepted Answer

Using a different discount rate for every line on the lease analysis' cash flows would reflect differing risk for each cash item and provide a more accurate analysis. This is because each cash item may have a different level of risk and therefore, should be evaluated with its own specific discount rate.

As a Practical Matter, the Lessee Uses a Single Discount