A cancellation clause would reduce the risk to the lessee since the firm would be allowed to terminate the lease at any point. Since the lease is less risky than a standard financial lease, and less risky than straight debt, which cannot usually be prepaid without a prepayment charge, the discount rate on the cost of leasing might be adjusted to reflect lower risk. (Note that this requires increasing the discount rate since cash outflows are being discounted.) The effect on the lessor is just the opposite--risk is increased. (Note that this would also require an increase in the lessor's discount rate.)