A student made three arguments about the firms' decision whether to lease or buy

1. Assets that have high sensitivity to use are likely to be leased as the risk of ownership is bore by the lessor
2. If both firms have different discount factors, then the lease agreement can be beneficial to both the lessee and the lessor
3. The depreciation tax shield is not included in the NPV (lease - buy) because depreciation is not a cash expense

Which of the student argument(s) is correct?

Group of answer choices

a) only 1

b) only 2

c) both 1 and 2 are correct but 3 is incorrect

d) both 1 and 3 are correct but 2 is incorrect

e) All the student's argument are correct