Which statement is correct about "agency cost of leasing"?
A)Conditions can be added to the lease agreement to increase agency costs.
B)Agency costs are nil if the lease contract covers the entire useful life of the asset.
C)Assets that are easy to damage are better candidates for leasing.
D)Assets that are difficult to damage have higher agency costs.

Question

Quizplus · Accepted Answer

Agency costs are nil if the lease contract covers the entire useful life of the asset because the lessor has no incentive to shirk on maintenance or other responsibilities since they will be responsible for the asset throughout its useful life.

Which Statement Is Correct About "Agency Cost of Leasing