What is the appropriate discount rate for valuing the lease?
A) 2.72%
B) 5.28%
C) 8.00%
D) 12.12%

Question

Quizplus · Accepted Answer

The appropriate discount rate for valuing the lease should reflect the riskiness of the lease payments. Generally, a higher discount rate is used for riskier cash flows. In this scenario, the lease payments are fixed and guaranteed by the government, which means they are not very risky. A discount rate of 5.28% would be appropriate for valuing these cash flows, considering the current market interest rates and the risk level of the payments.

What Is the Appropriate Discount Rate for Valuing the Lease