In the lease versus buy decision, leasing is often preferable

a. because, generally, no down payment is required, and there are no indirect interest costs.

b. because the lessee may have greater flexibility in abandoning the project in which the leased property is used than if the lessee bought and owned the asset.

c. because it has no effect on the firm's ability to borrow to make other investments.

d. because lease obligations do not affect the firm's risk as seen by investors.

e. because the lessee owns the property at the end of the least term.

Question

Business

Yuliana Munoz

25 June, 10:58

In the lease versus buy decision, leasing is often preferable

a. because, generally, no down payment is required, and there are no indirect interest costs.

b. because the lessee may have greater flexibility in abandoning the project in which the leased property is used than if the lessee bought and owned the asset.

c. because it has no effect on the firm's ability to borrow to make other investments.

d. because lease obligations do not affect the firm's risk as seen by investors.

e. because the lessee owns the property at the end of the least term.

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Answers (1)

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Teresa Bentley · Answer 1

The correct answer is b) because the lessee may have greater flexibility in abandoning the project in which the leased property is used than if the lessee bought and owned the asset.

Explanation:

A clear example of the previous statement is when, for work reasons, for pleasure, or because you want to change the environment; You want to change the house to a better or bigger one. However, it is not so easy, because the house where you currently live, you are the owner. And if you want to change of residence, you first have to rent or sell the house where you are living.

While if the house is leased, the last day of the month or depending on the contract, you can change of residence.

That's why leasing is considered better.