Question
A manufacturing company is considering expanding its
production capacity by acquiring new machinery. The company is exploring the option of leasing the machinery instead of purchasing it outright. In this scenario, which type of lease would be most suitable if the company wants to eventually own the machinery at the end of the lease term?Solution
A finance lease is a type of lease that transfers ownership of the asset to the lessee (the company) at the end of the lease term, making it the most suitable option if the company intends to own the machinery eventually.
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