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Questions and Answers
In a lease arrangement, the owner of the asset is:
In a lease arrangement, the owner of the asset is:
In a lease arrangement, the user of the asset is:
In a lease arrangement, the user of the asset is:
Which of the following would not be a characteristic of a financial lease?
Which of the following would not be a characteristic of a financial lease?
An independent leasing company supplies _______ leases versus the manufacturer who supplies
_______ leases.
An independent leasing company supplies _______ leases versus the manufacturer who supplies _______ leases.
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The city of Oakville sold some buildings and used the proceeds to improve its financial position. The
city then leased the buildings back in order to continue to use these facilities. This is an example of
The city of Oakville sold some buildings and used the proceeds to improve its financial position. The city then leased the buildings back in order to continue to use these facilities. This is an example of
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If the lessor borrows much of the purchase price of a leased asset, the lease is called:
If the lessor borrows much of the purchase price of a leased asset, the lease is called:
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An operating lease's primary characteristics are:
An operating lease's primary characteristics are:
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Operating leases:
Operating leases:
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The Canadian University sold medical equipment and used the proceeds to improve its financial
position. The University then leased the equipment back in order to continue to use these facilities.
This is an example of:
The Canadian University sold medical equipment and used the proceeds to improve its financial position. The University then leased the equipment back in order to continue to use these facilities. This is an example of:
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A financial lease has which as its primary characteristics:
A financial lease has which as its primary characteristics:
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An advantage of leasing is that the lessee does not own the asset and can cancel:
An advantage of leasing is that the lessee does not own the asset and can cancel:
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For accounting purposes, which of the following conditions would not automatically cause a lease to
be a financial lease?
For accounting purposes, which of the following conditions would not automatically cause a lease to be a financial lease?
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Capital leases would show up on the balance sheet of the firm in which manner for a six-year
machinery lease, worth $700,000:
Capital leases would show up on the balance sheet of the firm in which manner for a six-year machinery lease, worth $700,000:
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Prior to CICA 3065, "Accounting for Leases", lease activity was only reported in financial footnotes.
This off-balance-sheet-financing made firms with:
Prior to CICA 3065, "Accounting for Leases", lease activity was only reported in financial footnotes. This off-balance-sheet-financing made firms with:
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The reason the CRA is most concerned about lease contracts is:
The reason the CRA is most concerned about lease contracts is:
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A lease with high payments early in its life which then decline to termination would:
A lease with high payments early in its life which then decline to termination would:
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The appropriate discount rate for valuing a financial lease is:
The appropriate discount rate for valuing a financial lease is:
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Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The
lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception.
The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage
value. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is
34%.
What is the appropriate discount rate for valuing the lease?
Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception. The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage value. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is 34%. What is the appropriate discount rate for valuing the lease?
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Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The
lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception.
The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage
value. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is
34%.
What is the after-tax cash flow from leasing in year 0?
Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception. The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage value. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is 34%. What is the after-tax cash flow from leasing in year 0?
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Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The
lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception.
The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage
value. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is
34%.
What is the after-tax cash flow in years 1 through 5?
Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception. The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage value. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is 34%. What is the after-tax cash flow in years 1 through 5?
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Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The
lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception.
The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage
value. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is
34%.
What is the NPV of the lease?
Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception. The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage value. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is 34%. What is the NPV of the lease?
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Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The
lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception.
The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage
value. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is
34%.
What is the maximum lease payment that you would be willing to make?
Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception. The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage value. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is 34%. What is the maximum lease payment that you would be willing to make?
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Your firm is considering leasing a radiographic x-ray machine. The lease lasts for 3 years. The lease
calls for 4 payments of $25,000 per year with the first payment occurring immediately. The
computer would cost $140,000 to buy and would be straight-line depreciated to a zero salvage
value over 3 years. The actual salvage value is negligible. The firm can borrow at a rate of 12%. The
corporate tax rate is 40%.
This lease would be classified as a(n):
Your firm is considering leasing a radiographic x-ray machine. The lease lasts for 3 years. The lease calls for 4 payments of $25,000 per year with the first payment occurring immediately. The computer would cost $140,000 to buy and would be straight-line depreciated to a zero salvage value over 3 years. The actual salvage value is negligible. The firm can borrow at a rate of 12%. The corporate tax rate is 40%. This lease would be classified as a(n):
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Your firm is considering leasing a radiographic x-ray machine. The lease lasts for 3 years. The lease
calls for 4 payments of $25,000 per year with the first payment occurring immediately. The
computer would cost $140,000 to buy and would be straight-line depreciated to a zero salvage
value over 3 years. The actual salvage value is negligible. The firm can borrow at a rate of 12%. The
corporate tax rate is 40%.
What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in
years 1-3?
Your firm is considering leasing a radiographic x-ray machine. The lease lasts for 3 years. The lease calls for 4 payments of $25,000 per year with the first payment occurring immediately. The computer would cost $140,000 to buy and would be straight-line depreciated to a zero salvage value over 3 years. The actual salvage value is negligible. The firm can borrow at a rate of 12%. The corporate tax rate is 40%. What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in years 1-3?
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Your firm is considering leasing a radiographic x-ray machine. The lease lasts for 3 years. The lease
calls for 4 payments of $25,000 per year with the first payment occurring immediately. The
computer would cost $140,000 to buy and would be straight-line depreciated to a zero salvage
value over 3 years. The actual salvage value is negligible. The firm can borrow at a rate of 12%. The
corporate tax rate is 40%.
What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in
year 0?
Your firm is considering leasing a radiographic x-ray machine. The lease lasts for 3 years. The lease calls for 4 payments of $25,000 per year with the first payment occurring immediately. The computer would cost $140,000 to buy and would be straight-line depreciated to a zero salvage value over 3 years. The actual salvage value is negligible. The firm can borrow at a rate of 12%. The corporate tax rate is 40%. What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in year 0?
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Your firm is considering leasing a radiographic x-ray machine. The lease lasts for 3 years. The lease
calls for 4 payments of $25,000 per year with the first payment occurring immediately. The
computer would cost $140,000 to buy and would be straight-line depreciated to a zero salvage
value over 3 years. The actual salvage value is negligible. The firm can borrow at a rate of 12%. The
corporate tax rate is 40%.
What is the NPV of the lease relative to the purchase?
Your firm is considering leasing a radiographic x-ray machine. The lease lasts for 3 years. The lease calls for 4 payments of $25,000 per year with the first payment occurring immediately. The computer would cost $140,000 to buy and would be straight-line depreciated to a zero salvage value over 3 years. The actual salvage value is negligible. The firm can borrow at a rate of 12%. The corporate tax rate is 40%. What is the NPV of the lease relative to the purchase?
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The WACC is not used in the lease versus purchase decision because:
The WACC is not used in the lease versus purchase decision because:
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The risk of cash flow associated with the lease payment and the depreciation shield are:
The risk of cash flow associated with the lease payment and the depreciation shield are:
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Debt displacement is associated with leases because:
Debt displacement is associated with leases because:
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A financial lease is likely to be most beneficial to both parties when:
A financial lease is likely to be most beneficial to both parties when:
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The price or lease payment, that the lessee sets as their bound, is known as:
The price or lease payment, that the lessee sets as their bound, is known as:
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Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10
payments of $1,000 per year with the first payment occurring immediately. The computer would cost
$7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years. The actual
salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of
8%. The corporate tax rate is 30%.
What is the after-tax cash flow from leasing in years 1-9?
Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of $1,000 per year with the first payment occurring immediately. The computer would cost $7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 8%. The corporate tax rate is 30%. What is the after-tax cash flow from leasing in years 1-9?
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Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10
payments of $1,000 per year with the first payment occurring immediately. The computer would cost
$7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years. The actual
salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of
8%. The corporate tax rate is 30%.
What is the after-tax cash flow from leasing in year 0?
Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of $1,000 per year with the first payment occurring immediately. The computer would cost $7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 8%. The corporate tax rate is 30%. What is the after-tax cash flow from leasing in year 0?
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Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10
payments of $1,000 per year with the first payment occurring immediately. The computer would cost
$7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years. The actual
salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of
8%. The corporate tax rate is 30%.
What is the NPV of the lease?
Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of $1,000 per year with the first payment occurring immediately. The computer would cost $7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 8%. The corporate tax rate is 30%. What is the NPV of the lease?
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Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10
payments of $1,000 per year with the first payment occurring immediately. The computer would cost
$7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years. The actual
salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of
8%. The corporate tax rate is 30%.
What would the after-tax cash flow in year 9 be if the asset had a residual value of $500 (ignoring
any possible risk differences)?
Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of $1,000 per year with the first payment occurring immediately. The computer would cost $7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 8%. The corporate tax rate is 30%. What would the after-tax cash flow in year 9 be if the asset had a residual value of $500 (ignoring any possible risk differences)?
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Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10
payments of $1,000 per year with the first payment occurring immediately. The computer would cost
$7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years. The actual
salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of
8%. The corporate tax rate is 30%.
This lease would be classified as a(n):
Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of $1,000 per year with the first payment occurring immediately. The computer would cost $7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 8%. The corporate tax rate is 30%. This lease would be classified as a(n):
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Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10
payments of $1,000 per year with the first payment occurring immediately. The computer would cost
$7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years. The actual
salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of
8%. The corporate tax rate is 30%.
What is the appropriate discount rate for valuing the lease?
Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of $1,000 per year with the first payment occurring immediately. The computer would cost $7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 8%. The corporate tax rate is 30%. What is the appropriate discount rate for valuing the lease?
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Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The
lease calls for 6 payments of $300 thousand per year with the first payment occurring at lease
inception. The black box would cost $1050 thousand to buy and would be straight-line depreciated
to a zero salvage. The actual salvage value is zero. The firm can borrow at 8%, and the corporate
tax rate is 34%. All answers are in thousands.
What is the after-tax cash flow from leasing in year 0?
Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 6 payments of $300 thousand per year with the first payment occurring at lease inception. The black box would cost $1050 thousand to buy and would be straight-line depreciated to a zero salvage. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is 34%. All answers are in thousands. What is the after-tax cash flow from leasing in year 0?
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Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The
lease calls for 6 payments of $300 thousand per year with the first payment occurring at lease
inception. The black box would cost $1050 thousand to buy and would be straight-line depreciated
to a zero salvage. The actual salvage value is zero. The firm can borrow at 8%, and the corporate
tax rate is 34%. All answers are in thousands.
What is the after-tax cash flow in years 1 through 5?
Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 6 payments of $300 thousand per year with the first payment occurring at lease inception. The black box would cost $1050 thousand to buy and would be straight-line depreciated to a zero salvage. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is 34%. All answers are in thousands. What is the after-tax cash flow in years 1 through 5?
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