罗斯公司理财题库全集(34页).doc

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1、-罗斯公司理财题库全集-第 33 页Chapter 21LeasingMultiple Choice Questions1.In a lease arrangement, the owner of the asset is:A.the lesser.B.the lessee.C.the lessor.D.the leaser.E.None of the above.2.In a lease arrangement, the user of the asset is:A.the lesser.B.the lessee.C.the lessor.D.the leaser.E.None of the

2、 above.3.Which of the following would not be a characteristic of a financial lease?A.They are not usually fully amortized.B.They usually do not have maintenance necessary for the leased assets.C.They usually do not include a cancellation option.D.The lessee usually has the right to renew the lease a

3、t expiration.E.All of the above are characteristics of financial leases.4.An independent leasing company supplies _ leases versus the manufacturer who supplies _ leases.A.leveraged; directB.sales and leaseback; sales-typeC.capital; sales-typeD.direct; sales-typeE.None of the above5.Which of the foll

4、owing is not a financial lease?A.A leveraged leaseB.An operating leaseC.A sale-and-leasebackD.Both A and B.E.None of the above.6.If the lessor borrows much of the purchase price of a leased asset, the lease is called:A.a leveraged lease.B.a sale-and-leaseback.C.a capital lease.D.a nonrecourse lease.

5、E.None of the above.7.An operating leases primary characteristics are:A.fully amortized, lessee maintains equipment and there is no cancellation clause.B.not fully amortized, lessor maintains equipment and there is a cancellation clause.C.fully amortized, lessor maintains equipment and there is a ca

6、ncellation clause.D.not fully amortized, lessor maintains equipment and there is not cancellation clause.E.fully amortized, lessee maintains equipment and lessee can acquire assets at end of lease for fair market value.8.If a lease is for 35 years, it is regarded as a:A.financial lease.B.operating l

7、ease.C.capital lease.D.conditional sale.E.sale and leaseback.9.The city of Oakland sold some buildings and used the proceeds to improve its financial position. The city then leased the buildings back in order to continue to use these facilities. This is an example of:A.an operating lease.B.a short-t

8、erm lease.C.a sale and leaseback.D.a fully amortized lease.E.None of the above.10.A financial lease has the following as its primary characteristics:A.is fully amortized, lessee maintains equipment and there is no renewal clause and no cancellation clause.B.is not fully amortized, lessor maintains e

9、quipment and there is a renewal clause but no cancellation clause.C.is fully amortized, lessor maintains equipment and there is a renewal clause and a no cancellation clause.D.is not fully amortized, lessor maintains equipment and there is a renewal clause.E.is fully amortized, lessee maintains equi

10、pment and there is a renewal clause and a no cancellation clause.11.An advantage of leasing is that the lessor does not own the asset and can cancel:A.only financial leases.B.only operating leases.C.only capital leases.D.any kind of leases anytime.E.None of the above.12.A leveraged lease typically i

11、nvolves a non-recourse loan in which:A.the lessees payments go directly to the lender in case of default.B.the lessor is not obligated in case of default.C.the third party lenders have a first lien on the assets.D.All of the above.E.None of the above.13.For accounting purposes, which of the followin

12、g conditions would automatically cause a lease to be a capital lease?A.The lessee can purchase the asset below fair market value at the end of the lease.B.The lease transfers ownership of the asset to the lessee by the end of the lease.C.The lease term is more than 75% of the assets economic life.D.

13、The present value of the lease payments is more than 90% of the assets market value at lease inception.E.All of the above would lead to the lease being considered a capital lease.14.Capital leases would show up on the balance sheet of the firm in which manner for a six year machinery lease worth $70

14、0,000?A.Capital leases do not have to be put on the balance sheet; only financial leases do.B.Asset - Machinery $700,000; Liabilities - Long Term debt $700,000 because of debt displacement.C.Asset - Assets under Capital Lease $700,000; Liabilities - Obligations under Capital Lease $700,000.D.Assets

15、- Assets under Capital Lease $700,000; Liabilities - Long Term Debt $700,000 because of debt displacement.E.None of the above.15.Prior to FASB 13, Accounting for Leases, lease activity was only reported in financial footnotes. This off-balance-sheet-financing made firms with:A.capital leases appear

16、financially stronger than firms that used debt to purchase the asset.B.operating leases appear financially stronger than firms that used debt to purchase the asset.C.leases of any type appear financially stronger than firms that used debt to purchase the asset.D.All of the above.E.None of the above.

17、16.Which of the following is not an implication of FASB 13, Accounting for Leases?A.FASB 13 requires that the PV of the lease payments appear on the right hand side of the balance sheet.B.FASB 13 requires that the present value of the asset appear on the left hand side of the balance sheet.C.FASB 13

18、 allows for off-balance-sheet financing for operating leases.D.All of the above.E.None of the above.17.The reason the IRS is most concerned about lease contracts is:A.firms that lease generally pay no taxes.B.that leasing usually leads to bankruptcy.C.that leases can be set up solely to avoid taxes.

19、D.because leasing leads to off-balance-sheet-financing.E.All of the above.18.A lease with high payments early in its life which then decline to termination would:A.provide greater cash flow to the lessee in the beginning years.B.be evidence of tax avoidance and not acceptable to the IRS.C.be qualifi

20、ed as a capital lease under FASB 13.D.provide a lower residual value and thus ensure a bargain-purchase price option.E.All of the above.19.In valuing the lease versus purchase option, the relevant cash flows are the:A.tax shield from depreciation.B.investment outlay for the equipment.C.a decrease in

21、 the firms operating costs that are not affected by leasing.D.All of the above are relevant.E.None of the above are relevant.20.The appropriate discount rate for valuing a financial lease is:A.the firms after-tax weighted average cost of capital.B.the after-tax required return on assets of risks sim

22、ilar to the leased asset.C.the after-tax cost of secured borrowing.D.Either A or B.E.All of the above.21.The WACC is not used in the lease versus purchase decision because:A.the WACC was used in the decision to acquire the asset, this is only a financing decision.B.the WACC is used only when a lease

23、 alone is considered and not a lease versus purchase.C.the WACC does not include the lease cost of capital and therefore should not be used.D.tax rates of the lessor may be different than the lessee and therefore the WACC is incorrect.E.when a bank arranges a lease they do not consider the lessees c

24、ost of capital.22.Firms that use financial leases must consider their debt-to-equity ratios as inadequate measures of financial leverage because:A.lenders are concerned about the firms total liabilities and related cash flow.B.debt displacement occurs with leasing.C.less future debt can be raised fo

25、r a growing firm when a lease is used.D.All of the above.E.None of the above.23._ would be evidence the lease is being used to avoid taxes and not a legitimate business purpose.A.Early balloon paymentsB.Late balloon paymentsC.Capitalizing a leaseD.Transfer of lease payments to a second ownerE.None o

26、f the above24.Debt displacement is associated with leases because:A.all assets not purchased with equity use debt financing.B.debt is always a cheaper source of financing and preferred to equity financing.C.FASB 13 and the IRS mandate debt displacement.D.lease financing is all debt and causes an imb

27、alance in the optimal debt to equity ratio which reduces future debt financing.E.None of the above.25.A lease is likely to be most beneficial to both parties when:A.the lessors tax rate is lower than the lessees.B.the lessors tax rate is higher than the lessees.C.the lessors tax rate is equal to the

28、 lessees.D.a lease cannot be beneficial to both parties.E.a lease always has zero NPV, so both parties always break even.26.The price or lease payment that the lessee sets as their bound is known as:A.the present value of the tax shields.B.the reservation payment, LMIN.C.the present value of operati

29、ng savings.D.the reservation payment, LMAX.E.None of the above.27.Which of the following is probably not a good reason for leasing instead of buying?A.Taxes may be reduced by leasing.B.Leasing may reduce transactions costs.C.Leasing may provide a beneficial reduction of uncertainty.D.All of the abov

30、e are good reasons.E.All of the above are not good reasons.28.Which of the following is probably a good reason for leasing instead of buying?A.Leasing provides 100% financing.B.Leasing is not considered a form of debt financing.C.Leasing may increase EPS relative to buying.D.All of the above are goo

31、d reasons.E.None of the above is a good reason.29.Some assets are leased more than others because:A.the value of the asset under a lease is not highly affected by term of use or maintenance decisions.B.a lease may be used to fool clients into buying high priced assets above market value.C.leasing al

32、lows sellers to attract clients with low prices as the basis for setting the contract.D.Both A and B.E.Both A and C.30.To meet IRS guidelines for leasing, the lease should:A.limit the lessees right to issue debt or pay dividends while the lease is operative.B.not limit the lessees right to issue deb

33、t or pay dividends while the lease is operative.C.pay a very high return to the lessor.D.transfer ownership of the asset at the end of the lease at below fair market value.E.be over 30 years.Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments

34、 of $1,000 per year with the first payment occurring immediately. The computer would cost $7,650 to buy and would be straight-line depreciated to a zero salvage value over 9 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 8%. The

35、corporate tax rate is 30%.31.What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in years 1-9?A.$-255B.$-955C.$-1,295D.$-1,850E.None of the above32.What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in year 0?

36、A.$-4,865B.$-700C.$6,950D.$7,650E.None of the above33.What is the NPV of the lease relative to the purchase?A.$-1,039.78B.$339.78C.$360.22D.$6,610.22E.None of the above34.What would the after-tax cash flow in year 9 be if the asset had a residual value of $500 (ignoring any possible risk differences

37、)?A.$-605B.$-955C.$-1,455D.$-1,305E.None of the above35.This lease would be classified as a(n):A.operating lease because the asset will be obsolete.B.operating lease because there is no amortization.C.leveraged lease because it is being financed.D.capital lease because the lease life is greater than

38、 75% of the economic life.E.sale and leaseback because the company gets full use of the asset.Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception. T

39、he system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage value. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is 34%.36.What is the appropriate discount rate for valuing the lease?A.2.72%B.5.28%C.8.00%D.12.12%E.None of

40、the above.37.What is the after-tax cash flow from leasing in year 0?A.$300,000B.$495,000C.$852,000D.$948,000E.None of the above38.What is the after-tax cash flow in years 1 through 5?A.$-126,600B.$-198,000C.$-269,400D.$-287,250E.None of the above39.What is the NPV of the lease?A.$-111,690B.$-295,040

41、C.$-305,388D.$-309,690E.None of the above40.What is the maximum lease payment that you would be willing to make?A.$170,655B.$175,000C.$187,842D.$210,307E.None of the above41.What is the minimum lease payment that the lessor would be willing to accept?A.$161,000B.$176,995C.$217,645D.$237,083E.None of

42、 the aboveYour firm is considering leasing a new laser light. The lease lasts for 3 years. The lease calls for 4 payments of $10,000 per year with the first payment occurring immediately. The computer would cost $45,000 to buy and would be straight-line depreciated to a zero salvage value over 3 yea

43、rs. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 10%. The corporate tax rate is 35%.42.What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in years 1-3?A.$-32,775B.$-11,750C.$-1,750D.$-1,85

44、0E.None of the above43.What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in year 0?A.$-35,000B.$-38,500C.$35,000D.$38,500E.None of the above44.What is the NPV of the lease relative to the purchase?A.$-6,500B.$7,380C.$4,678D.$12,400E.None of the above45.

45、What would the after-tax cash flow in year 3 be if the asset had a residual value of $1,000 (ignoring any possible risk differences)?A.$-11,750B.$11,750C.$12,400D.$-12,400E.None of the above46.This lease would be classified as a(n):A.operating lease because the asset will be obsolete.B.operating lea

46、se because there is no amortization.C.leveraged lease because it is being financed.D.capital lease because the lease life is greater than 75% of the economic life.E.sale and leaseback because the company gets full use of the asset.Essay Questions47.Sardinas Sardines has assets valued at $10 million and equity of $10 million. The firm recently leased new equipment worth $1 million. Present the balance sheet under two conditions; the lease is judged to be an opera