generate answers in 2 steps with an explanations in each step and each step by step and make some good headings, explanation, and final solutions also A lease versus purchase analysis should compare the cost of leasing to the cost of owning, assuming that the asset purchaa. is financed with short-term debt.Ob. is financed with retained earnings.Oc. is financed with long-term debt.Od. is financed with a mix of debt and equity based on the firm's target capital structure, i.e., at the WOe. is financed with debt whose maturity matches the term of the lease.

ExplanationIn a lease against purchase study, it is crucial to compare the cost of leasing with the…

Answered: A lease versus purchase analysis should…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 4QTD

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The following statements relate to the impact on the financial statements for operating vs. finance leases. Indicate all statements that are correct. Select one or more: a. Net Income is higher at first when a lease is classified as a finance lease. b. The right of use asset is shown at a higher amount for a finance lease. c. Operating Income is lower when a lease is classified as an operating lease. d. The lease liability is measured as the present value of future cash flows for both operating and finance leases. PreviousSave AnswersNext
Which of the following statements is most CORRECT? Oa. A key difference between a capital lease and an operating lease is that with a capital lease, the lease payments provide the lessor with a return of the funds invested in the asset plus a return on the invested funds, whereas with an operating lease the lessor depends on the residual value to realize a full return of and on the investment. Ob. Finance leases usually have a cancelation feature. Oc. Capital, or financial, leases generally provide for maintenance by the lessor. Od. Capitalizing a lease means that the firm issues equity capital in proportion to its current capital structure, in an amount sufficient to support the lease payment obligation. Oe. The fixed charges associated with a lease can be as high as, but never greater than, the fixed payments associated with a loan.
How would you compare the results between the lease assets vs total assets and the lease liabilties vs total liabilities visualization? a. lease assets are higher than lease liabilites for both albertson and kroger. b. operating lease assets and lease liabilties values are similar between albertson and kroger. c. total assets and total liabilities values are similar between albertson and kroger. d. finance lease assets are higher than finance lease liabilities for both albertson and kroger.
What should be the discount rate for capitalizing the operating leases?A. If possible, the implied internal rate of return (IRR) that equates the sum of thediscounted capital lease payments with the reported PV of the payments.B. The effective interest rate (EIR) that represents the average interest rate thatthe company pays on its debt.C. The effective tax rate (ETR) that represents the average tax rate that thecompany pays on its earnings.D. None of the above.
2. Lease Liabilities vs Total Liabilities $0.78 2019 $6.08 Albertson $22.5B $0.68 2020 $6.28 $23.78 $0.88 2019 $7.18 Kroger $36.78 $1.08 2020 $7,28 $39.18 Finance Lease Liabilities Operating Lease Liabilities. Total Liabilities
2 Which statement is correct in comparing capital leases to operating leases? a) A capital lease will have a higher asset turnover compared to an operating lease. b) A capital lease will increase the return on total assets compared to an operating lease. c) A capital lease will have a lower debt-to-equity ratio compared to an operating lease. d) A capital lease will have a higher debt-to-equity ratio compared to an operating lease.
Use attachement to answer the following Option D Option A Option B Option C
A key difference between a capital lease and an operating lease is that with a capital lease, the lease payments provide the lessor with a return of the funds invested in the asset plus a return on the invested funds, whereas with an operating lease the lessor depends on the residual value to realize a full return of and on the investment. True or false explain
To better evaluate the solvency of a company, an analyst would most likely add to totalliabilitiesA . the present value of future capital lease payments.B . the total amount of future operating lease payments.C . the present value of future operating lease payments.
the best answer. The leaseback in a sale-leaseback transaction may be classified by the buyer/lessor as a(n): O A. finance lease. B. minimum lease. C. operating lease. D. sales-type lease. G
Capitalizing a lease means that the firm issues equity capital in proportion to its current capital structure, in an amount sufficient to support the lease payment obligation true or false explain
Which of the following statements is characteristic of leases? a.If a lease is classified as an operating lease, the lessee records an asset on its statement of financial position. b.Lease agreements are not a popular form of financing the purchase of assets because leases require a large initial outlay of cash. c.If a lessor classifies a lease as a finance lease, the lessor records a lease liability on its statement of earnings. d.Accounting recognizes two types of leases—operating and finance.

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