Use the following statement to answer this question:
Capital leases are evaluated by discounting the salvage value at the company's WACC
A) True if the salvage value is more risky
B) False

Question

Quizplus · Accepted Answer

The statement is false. Capital leases are evaluated by discounting the minimum lease payments at the company's incremental borrowing rate, not by discounting the salvage value at the company's WACC. The salvage value may be estimated separately and added to the present value of the minimum lease payments.

Use the Following Statement to Answer This Question