The relevant discount rate for evaluating a lease is the firm's:

A) Cost of equity financing.
B) Pre-tax cost of borrowing.
C) After-tax cost of borrowing.
D) Cost of working capital.
E) Rate of return on short-term assets.

Relevant Discount Rate

The interest rate used to discount future cash flows to their present value to account for the risk and time value of money in decision making.

Cost of Borrowing

The total charges, including interest and any other fees, that a borrower incurs when taking out a loan.

After-Tax Cost

The expense of an expenditure or investment after accounting for the effects of taxes.