3. Capital Budgeting
Lease Versus Buy — Quiz
Test your understanding of lease versus buy with 5 practice questions.
Practice Questions
Question 1
A company is evaluating a lease versus buy decision for a machine with a purchase price of $180,000$ and an estimated useful life of $6$ years with a salvage value of $30,000$. If the company uses straight-line depreciation and has a tax rate of $30\%$, what is the annual depreciation tax shield for the purchasing option?
Question 2
When analyzing the financial reporting consequences of a lease versus buy decision under current accounting standards (ASC 842/IFRS 16), which of the following statements is true regarding the balance sheet impact of an operating lease?
Question 3
A company is considering acquiring a new fleet of delivery vehicles. If they choose to lease the vehicles, which of the following cash flows would be most relevant to their financial analysis?
Question 4
From a tax perspective, which of the following is generally deductible for a company that purchases an asset and finances it with debt?
Question 5
A company requires a specialized machine for a project expected to last $3$ years. The machine has a total useful life of $10$ years. Which of the following best describes a key advantage of leasing over buying in this specific scenario?