Venture ability to generate future cash flow

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Reference no: EM131930420

1. This provides a connection between a venture's ability to generate future cash flow and an investor's willingness to provide funds necessary to achieve those future cash flows

Non free cash flows

Historical forecast period

Terminal Value

None of the above

2. Phillips Corporation has entered into a monthly leasing contract for 3 years on an asset with a useful life of 5 years. The asset's estimated fair value is $28,000. The contract requires monthly lease payments of $850. There is no bargain purchase option or transfer of title in the lease contract. The discount rate is 9%. Should Phillips record this as a capital lease? Select one:

A. Yes, because the lease term makes this a capital lease.

B. No, because the lease contract contains no transfer of ownership.

C. Yes, because the lease payments make this a capital lease.

D. No, because this is an operating lease without a bargain purchase option.

Reference no: EM131930420

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