Question

Under the borrowing-purchasing decision compared to leasing, we must consider not only the amount of the payment but also separate out those items that are tax deductible.

a. true
b. false

Answer 1

It is true that when comparing leasing to borrowing-purchasing options, one must consider the payment amounts and the tax-deductible elements of those payments. Taxes can significantly influence the total cost.

Step-by-step explanation:

The statement under the leasing vs. borrowing-purchasing decision is indeed true. When deciding between borrowing to purchase an asset and leasing it, one must consider not only the payment amounts but also the elements of those payments that are tax-deductible. For borrowing, interest expenses on the loan can generally be deducted for tax purposes. When it comes to leasing, the lease payments can typically be deducted as well. The tax benefits associated with either option can significantly impact the overall cost and should therefore be taken into account when making a financial decision.