9018_02_Tue1_2013_sp

Description:

Choose your best answers.

The payoff structure of risky debtholders mimics a portfolio consisting of what?

A long put option.
A long call option.
A short put and risky debt.
A short call and risky debt.
None of the above.

Pluto Ltd is considering to lease a machine . Expected life is 4 years and residual value is $15,000. Annual lease payments are $16,500 payable in adv

$14,520.
$5,775.
$5,250.
$1,980.
Need more information.

Which of the following suggested advantages of leasing are truly valid? :

Lower transaction costs for lessor in case of lessee default.
Leasing provides 100% debt financing.
Leasing increases debt capacity because is off-balance sheet.
(a) and (b).
(b) and (c).

Which of the following asset characteristics increase the propensity for an asset to be leased rather than purchased:

The asset is more sensitive to use and maintenance.
The disposal value for the lessor is uncertain.
The asset is very specialised and valued less by the lessor.
Low costs of quality assessment and ownership transfer.
None of the above.