Question

Question 21 2 pts Which of the following statements is false? 1. The lease-equivalent loan is the loan that is required on the purchase of the asset that leaves the purchaser with the same obligations as the lessor would have. 2. Lease obligations themselves could trigger financial distress. 3. When a firm enters into a lease, it is committing to lease payments that are a fixed future obligation of the firm. 4. When a firm leases an asset, it is effectively adding leverage to its capital structure (whether or not the lease appears on the balance sheet for accounting purposes). O 3 4 1

Answer 1

1.
Option 1

The lease-equivalent loan is the loan that is required on the purchase of the asset that leaves the purchaser with the same obligations as the lessee would have

2.
Option 3

With a standard loan we are financing the entire cost of the asset, with a lease we are financing only the cost of the economic depreciation of the asset during its life

3.
Option 1

Increasing the pay for performance sensitivity comes with the added benefit of reducing owner's risk

4.
Option 3

Calling a convertible bond transfers the remaining time value of the conversion option from bondholders to shareholders
5.
Option 1

Managers are much more committed to dividend payments than to share repurchases