If an equivalent loan has the same cash flows as a lease, and results in a $1,500 higher present value, one could conclude that: present value than the lease analysis indicated, this shows:
A)That leasing is preferable to buying the asset, since owning costs $1,500 more
B)That either is acceptable, since the cash flows are the same
C)One should not lease
D)That owning will require more capital up front

Question

Quizplus · Accepted Answer

The higher present value of the loan indicates that leasing is more cost-effective, suggesting that one should not lease if the goal is to minimize present value costs.

If an Equivalent Loan Has the Same Cash Flows as a Lease