to use in calculating the present value of the incremental after-tax cash flows associated with a lease financing? Why is the expected residual value of the asset discounted at a higher rate?
Multiple choices are:
the risk of the cash flows connected to the asset is usually different from the risk of the debt payments
the appropriate discount rate is the lessee's after-tax cost of similarly secured debt because the risk of the lease payments is the same as the risk of similarly secured debt
the appropriate discount rate is typically a weighted average of the firm's secured and unsecured debt
the expected residual value of the asset is typically discounted at a higher rate to reflect its typically greater riskiness because residual value is related to project risk, not financing risk.
A and B
A and C
A and D
B and C
B and D
C and D
all but A
all but B
all but C
all but D
all are true