Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 21, Problem 2CQ
Leasing and Taxes Taxes are an important consideration in the leasing decision. Which is more likely to lease: A profitable corporation in a high tax bracket or a less profitable one in a low tax bracket? Why?
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Students have asked these similar questions
Leasing can be beneficial due to:
A Tax advantages for both lessors and lessees.
B
D
Guaranteed asset ownership at the end of the lease term.
Lower upfront costs compared to purchasing the asset.
Reduced maintenance and repair responsibilities for the lessee.
What are the major advantages to a lessor for becoming involved in a leasing arrangement?
Describe some economic factors that might provide an advantageto leasing.
Chapter 21 Solutions
Corporate Finance
Ch. 21 - Leasing vs. Borrowing What are the key differences...Ch. 21 - Leasing and Taxes Taxes are an important...Ch. 21 - Leasing and IRR What arc some of the potential...Ch. 21 - Leasing Comment on the following remarks: a....Ch. 21 - Accounting for Leases Discuss the accounting...Ch. 21 - IRS Criteria Discuss the IRS criteria for...Ch. 21 - Off- Balance Sheet Financing What is meant by the...Ch. 21 - Sale and Leaseback Why might a firm choose to...
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- Why should investors be concerned about market rents if they are purchasing a property subject to leases?arrow_forwardWhich of the following is nota reason why some companies lease rather than buy? A. Leasing may allow you to borrow with little or no down payment. B. Leasing can improve the balance sheet by reducing long-term debt. C. Leasing can lower income taxes. D. Leasing transfers the title to the lessee at the beginning of the lease.arrow_forwardWhat will be the Return from Owning versus Leasing explain with example?arrow_forward
- Which of the following typically represents an advantage of leasing over purchasing an asset with an installment note? a. Lease payments often are lower than installment payments.b. Leasing generally requires less cash upfront.c. Leasing typically offers greater flexibility and lower costs in disposing of an asset.d. All of the above are advantages of leasing.arrow_forwardWhat are some non financial reasons for leasing?arrow_forwardWhat would be the advantages and disadvantages of leasing assets instead of owning them? How would the financial statements be different in a leasing situation (for both operating leases and finance leases) for the lessee? What about the lessor (including all of the types)? What disclosures should be made by lessees and lessors related to future lease payments?arrow_forward
- s) Which of the following is NOT one of the benefits of leasing an asset from another company? ... O Protection against obsolescence O Complete financing O Lower interest rates than normal debt O Increased likelihood of salearrow_forwardIdentify the incorrect statement concerning lease finance. A. Companies that are short of finance can use leasing as a source of assets B. Lease payments attract tax relief C. Interest payments attract tax relief D. Finance leasing allows companies to avoid the problem of obsolescence in cases where assets are subject to rapid technological change E. Empirical research has shown that many companies use an incorrect method when evaluating lease financearrow_forwardAs a borrower, how would you approach negotiating the working capital and capital expenditure restrictions a lender wished to impose?arrow_forward
- Which of the following statements are true? I. Financial leasing can still provide off-balance sheet financing. II. The cost of capital for a financial lease is the interest rate the company would pay on a bank loan. III. An equivalent loan's principal plus after-tax interest payments exactly match the after-tax cash flows of the lease. IV. It makes sense for firms that pay no taxes to lease from firms that do. Select one: O a. II, III and IV only O b. I. Il and II. O. Il and IIl only O d. I, II, II, and IVarrow_forwardWhat are the key advantages and disadvantages of leasing?arrow_forwardWhat is net advantage to leasing (NAL)?arrow_forward
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