Assertion (A): Firms opt for buying an asset if the equivalent annual cost of ownership and operation is less than the best lease rate it can get.

Reason (R): Operating leases are attractive to equipment users if the lease payment is less than the user's equivalent annual cost of buying the equipment.

Choose the most appropriate answer from the options given below:

Correct option is B

Assertion (A):
"Firms opt for buying an asset if the equivalent annual cost of ownership and operation is less than the best lease rate it can get."
· This statement is correct.
· When a firm evaluates whether to buy or lease an asset, it compares the equivalent annual cost (EAC) of owning and operating the asset to the lease rate. If the EAC of owning the asset is lower than the best lease rate available, the firm will prefer to buy the asset.
Reason (R):
"Operating leases are attractive to equipment users if the lease payment is less than the user's equivalent annual cost of buying the equipment."
· This statement is also correct.
· Operating leases can be an attractive option for firms if the lease payment is lower than the EAC of buying the equipment, as leasing allows for lower upfront costs and potentially lower ongoing payments compared to ownership.
Firms choose to buy an asset if the equivalent annual cost of owning and operating it is lower than the best lease rate available. Similarly, operating leases become appealing to equipment users when the lease payment is less than the user's equivalent annual cost of purchasing the equipment.
Both (A) and (R) are correct; however, the reason provided does not adequately explain the assertion. Therefore, option (b) is the correct choice.