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The lessor will recover a greater net investment if the residual value is guaranteed instead of unguaranteed.

a) True
b) False

User Pwuertz
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1 Answer

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Final answer:

The statement is true as a guaranteed residual value provides a security to the lessor for recovering a greater net investment compared to an unguaranteed residual value.

Step-by-step explanation:

The statement that 'the lessor will recover a greater net investment if the residual value is guaranteed instead of unguaranteed' is True. In a lease agreement, a guaranteed residual value means that the lessee assures the lessor that the asset will have a certain value at the end of the lease term. If the actual residual value is lower than the guaranteed amount, the lessee is required to make up the difference, thus ensuring the lessor recovers a set amount. Conversely, with an unguaranteed residual value, the lessor bears the risk of the asset being worth less than anticipated, which could result in a smaller recovery of their net investment.

User Rich Seviora
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