A lease is likely to be most beneficial to both parties when:
A) the lessor's tax rate is lower than the lessee's.
B) the lessor's tax rate is higher than the lessee's.
C) the lessor's tax rate is equal to the lessee's.
D) a lease cannot be beneficial to both parties.
E) a lease always has zero NPV, so both parties always break even.

Question

Quizplus · Accepted Answer

When the lessor's tax rate is higher than the lessee's, the lessor can benefit more from tax deductions related to the leased asset, making the lease more beneficial to both parties.

A Lease Is Likely to Be Most Beneficial to Both