A company estimates that the incremental cost of owning a parcel of real estate vs.leasing will be 10%.The company expects a 12% rate of return on investments.Therefore real estate should be owned and not leased.

Question

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The decision to own or lease real estate should consider the cost of ownership versus leasing and the expected rate of return. If the incremental cost of owning is 10% and the company expects a 12% return on investments, leasing might be more favorable as it allows the company to invest the difference for a potentially higher return.

A Company Estimates That the Incremental Cost of Owning a Parcel