If a financial lease analysis shows a NPV of $1,750 that means:
A)It will cost the lessee $1,750 more to lease
B)It will cost the lessee $1,750 more to own
C)The lessee will have to put down $1,750 as a lease deposit
D)The lessor should raise his annual lease payments by $1,750

Question

Quizplus · Accepted Answer

NPV stands for Net Present Value, which represents the difference between the present value of cash inflows and the present value of cash outflows over a specific period. A positive NPV in a financial lease analysis indicates that the lessee will save money by leasing instead of owning the asset. Therefore, Option B is correct as it suggests that the lessee will have to pay $1,750 more if they decide to own instead of leasing the asset.

If a Financial Lease Analysis Shows a NPV of $1,750