In a lease analysis holding the cash flows constant ie all e

In a lease analysis, holding the cash flows constant (i.e., all else the same), what is the impact of adding a cancellation clause to the lease agreement?

Solution

Lease is defined as a contract between two parties for use of assets of one parties by paying rent for using assets. A cancellation clause is one of the condition in lease contract that give Lessee risght to cancel the lease anytime and return assets to lessor before expiration of lease contrcat.

So, cancellation clause The lease will be more attractive for the lessee..

Option (B) is correct answer.