What Is the Main Reason for Using a Higher Discount

Multiple Choice

What is the main reason for using a higher discount rate for the salvage value of an asset than for other cash flows?

A) The other variables are more easily controlled by the lessee, so therefore they should be discounted at a lower rate than the salvage value
B) The other variables are more uncertain than the salvage value and hence, they should be discounted at a lower rate
C) The salvage value is more uncertain than the other variables in the analysis
D) The salvage value increases the cost of purchasing the asset, and therefore, a higher discount rate should be used to offset this higher cost