Exam 15: Leasing and Other Equipment Finance

An argument forwarded as justification for leasing is that it allows a company to conserve its capital.Which of the following statements offers criticism of this argument?

A finance lease is a short-term,cancellable lease.

In a perfect capital market,investors are _____________ between leasing and buying an asset.

A tax deduction may be permitted for lease rentals provided that:

In the lease contract,the party that owns the asset is called the _________.

The lessor in a leveraged lease is usually:

Which of the following statements with regards to operating leases is false?

Which feature of a lease ensures that lease payments are tax deductible to the lessee?

Calculate the present value to XYZ Ltd of cash flows from the ownership of equipment that it intends to lease to another company for five years.The equipment costs $500 000 and can be depreciated straight-line over three years for tax purposes.Assume the cost of capital is 10% p.a. ,the residual value is 20 per cent of cost and the tax rate is 30 per cent.

An essential characteristic of operating leases is that:

Which of the following statements best describes leveraged lease agreements?

Under the provisions of Taxation Ruling IT2051,the debt participants are expected to contribute no more than:

Which of the following statements is not a reason for disposing of an asset earlier than expected?

XYZ Ltd intends to lease to another company for a duration of five years equipment which costs $500 000 and can be depreciated straight-line over three years for tax purposes.Assume the cost of capital is 10% p.a. ,the residual value is 20 per cent of cost and the tax rate is 30 per cent.Calculate the required present value of the lease payments.

Company-specific assets are more likely to be:

Which of the following statements represents a potential advantage to leasing?

Which of the following statements with regards to leases is false?

The default costs of a lease agreement are often significantly higher than the default costs of other forms of debt.

One of the main reasons for firms entering into an operating lease as the lessee is:

Which of the following statements with regards to taxation and leases is the most accurate?