In the net advantage to leasing calculation, all cash flows (except salvage value) are discounted at the firm's ____.
A) weighted (marginal) cost of capital
B) cost of internal equity capital
C) pretax marginal cost of borrowing
D) after-tax marginal cost of borrowing

Question

Quizplus · Accepted Answer

In the net advantage to leasing calculation, cash flows are typically discounted at the after-tax marginal cost of borrowing because leasing is a financing decision and the cost of borrowing reflects the opportunity cost of funds.

In the Net Advantage to Leasing Calculation, All Cash Flows