1. Distinguish between operating leases and financial leases. Would you be more likely to find an operating lease employed for a fleet of trucks or for a manufacturing plant? Explain. 2. Are lessees more likely to be in higher or lower income tax brackets than lessors? Explain.

3. How should appreciation of a firm's home country currency generally affect its cash inflows? How should depreciation of a firm's home country currency generally affect its cash outflows?

4. Smith, Inc., produces furniture and has no international business. Its major competitors import most of their furniture from Brazil and then sell it out of retail stores in the United States. How will Smith be affected if Brazil's currency (the real) strengthens over time?