John has been asked to evaluate whether it would be better to lease an asset or to borrow money from the bank to buy the asset, for a potential project. The NPV from the project has been estimated to be-$1,000. The NPV for the lease versus borrow to buy has been estimated to be $800. Which of the following statements best describe the decision that John should make? O John should not invest the project at all because the total NPV is negative. O None of the other statements is correct. O John should lease the asset and invest in the project as long as the periodic lease payment is less than $800. O John is indifferent between borrowing to buy the asset and leasing the asset. O John should lease the asset and invest in the project as it will increase the value of the company.
John has been asked to evaluate whether it would be better to lease an asset or to borrow money from the bank to buy the asset, for a potential project. The NPV from the project has been estimated to be-$1,000. The NPV for the lease versus borrow to buy has been estimated to be $800. Which of the following statements best describe the decision that John should make? O John should not invest the project at all because the total NPV is negative. O None of the other statements is correct. O John should lease the asset and invest in the project as long as the periodic lease payment is less than $800. O John is indifferent between borrowing to buy the asset and leasing the asset. O John should lease the asset and invest in the project as it will increase the value of the company.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:John has been asked to evaluate whether it would be better to lease an asset or to borrow money
from the bank to buy the asset, for a potential project. The NPV from the project has been
estimated to be -$1,000. The NPV for the lease versus borrow to buy has been estimated to be
$800. Which of the following statements best describe the decision that John should make?
O John should not invest the project at all because the total NPV is negative.
O None of the other statements is correct.
O John should lease the asset and invest in the project as long as the periodic lease payment is less than $800.
O John is indifferent between borrowing to buy the asset and leasing the asset.
O John should lease the asset and invest in the project as it will increase the value of the company.
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