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Principles of Corporate Finance Study Set 3

Business

Quiz 25 :

Leasing

Quiz 25 :

Leasing

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The following are sensible reasons for leasing except
Free
Multiple Choice
Answer:

Answer:

C

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The FASB defines financial lease as leases that meet the following: I.The lease agreement transfers ownership to the lessee before the lease expires. II.The lessee can purchase the asset for a bargain price when the lease expires. III.The lease lasts for at least 75% of the asset's estimated economic life. IV.The present value of the lease payments is at least 90% of the asset's value
Free
Multiple Choice
Answer:

Answer:

C

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The following are sensible reasons for leasing: I.Maintenance is provided. II.There is affirmation of lease cash flows during bankruptcy. III.Leasing avoids capital expenditure controls. IV.Short-term leases are convenient.
Free
Multiple Choice
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Answer:

D

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If the after-tax lease payment per year is $17,000, calculate the before-tax lease payments if the marginal tax rate is 21 percent.
Multiple Choice
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Sale and lease-back arrangements are prevalent in
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The following are advantages to lessors over secured lenders if a lessee is under bankruptcy except:
Multiple Choice
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The following are sensible reasons for leasing: I.Short-term leases are convenient. II.Standardization leads to low administrative and transaction costs for the lessor. III.Lease cancellation options are valuable. IV.Tax shields can be used.
Multiple Choice
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Which of the following is probably not a good reason for leasing instead of buying?
Multiple Choice
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A lease payment can be thought of as
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If the after-tax present value of buying equipment and using it for six years is $100,000, calculate the break-even after-tax yearly lease payment (seven payments)using a 7 percent real discount rate. (Assume that lease payments are made at the beginning of the year and zero inflation.)
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Which of the following motivations are dubious reasons for leasing? I.Leasing avoids capital expenditure controls. II.Leasing preserves capital. III.Leasing can make the firm's balance sheet and income statement look better by increasing book income or decreasing book assets or both. IV.Tax shields can be used.
Multiple Choice
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If annual lease payments for a firm are $26,000, calculate the annual tax shield of these payments, given that the marginal tax rate is 21 percent.
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Leveraged leases are a form of
Multiple Choice
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If the lessor borrows most of the purchase price of a leased asset, the lease is called a
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Which of the following is not a financial lease?
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In a lease arrangement, the owner of the asset is the
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In a lease arrangement, the user of the asset is the
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If the depreciation is $20,000 and the marginal tax rate is 21 percent, calculate the annual depreciation tax shield.
Multiple Choice
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Firm X sold its office building and used the proceeds to improve its financial position. The firm then leased the building back in order to continue to use the facility. This is an example of a(n)
Multiple Choice
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Which of the following statements is not true? I.The lessee does not have to buy the equipment. II.The lessee is responsible for making the lease payments. III.Lease payments are not tax-deductible. IV.The lessee may give up the depreciation tax shield.
Multiple Choice
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