a. because it has no effect on the firm's ability to borrow to make other investments.
b. because, generally, no down payment is required, and there are no indirect interest costs.
c. because lease obligations do not affect the firm's risk as seen by investors.
d. because the lessee owns the property at the end of the least term.
e. because the lessee may have greater flexibility in abandoning the project in which the leased property is used than if the lessee bought and owned the asset.© BrainMass Inc. brainmass.com October 17, 2018, 1:40 am ad1c9bdddf
A lease is a legal obligation to pay for the use of the property of another entity for a specified period of time or upon the happening of a specified event. Lease obligations are disclosed in the notes to the firm's financial statements and are viewed as debts by investors and lenders; thus, answers ...
This solution discusses the relative advantages of leasing an asset over buying it.
Analyzing Lease Vs. Buy Decisions
Summarize different capital budgeting concepts by answering the following questions:
1) What risks and uncertainties should be considered while making a lease vs. buy decision? How do these risks and uncertainties impact capital budgeting?
2) What is the advantage of computing the present value of outflows in making lease vs. buy decisions?
3) In what circumstances is a capital lease a better alternative to an operating lease? Under what circumstances is a capital lease a better alternative than buying an asset?
4) How do qualitative factors like the condition of an asset impact a final lease or buy decision?View Full Posting Details