A) In a direct lease,the lessor is the manufacturer (or a primary dealer) of the asset.
B) The lease specifies any cancellation provisions,the options for renewal and purchase,and the obligations for maintenance and related servicing costs.
C) If a firm already owns an asset it would prefer to lease,it can arrange a sale and leaseback transaction.
D) With many leases,the lessor provides the initial capital necessary to purchase the asset,and then receives and retains the lease payments.
F) None of the above
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First we construct the FCF from leasing ...View Answer
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A) $1.00 out lease.
B) fixed price lease.
C) fair market value lease.
D) fair market value cap lease.
F) A) and B)
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A) FMV lease versus $1.00-out lease
B) $1.00-out lease versus true tax lease
C) Lease versus buy
D) Lease versus borrow
F) B) and C)
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A) A lease is a contract between two parties: the lessee and the lessor.
B) Most leases involve little or no upfront payment.
C) The lessee is the owner of the asset,who is entitled to the lease payments in exchange for lending the asset.
D) At the end of the contract term,the lease specifies who will retain ownership of the asset and at what terms.
F) None of the above
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A) Whether they appear on the balance sheet or not,lease commitments are liabilities for the firm.
B) For most large corporations,the amount of leverage the firm can obtain through a lease is unlikely to exceed the amount of leverage the firm can obtain through a loan.
C) Some companies may place limits on the dollar amounts a manager can invest over a certain period.
D) All of the above are reasons why reducing leverage through off-balance sheet financing is not a valid argument for leasing.
F) All of the above
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