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 allows for a more refined approach as it reflects differing risk for each cash item. This takes into account the time value of money and the specific risks associated with each cash flow, resulting in a more accurate representation of the true cost and benefits of the lease.

As a Practical Matter, the Lessee Uses a Single Discount