In discounting, which sequence describes the transaction?

In discounting, which sequence describes the transaction?

• A. Lessor negotiates terms with lessee and then sells cash flows to a bank
• B. Lessor receives payment upfront and transfers ownership
• C. Originate, document, then discount; the lessor receives PV of the stream immediately
• D. Lessor sells the asset to a third party

Answer: (C)

Discounting monetizes future lease payments by turning them into cash today. The typical flow is to originate the lease with the lessee, document the agreement so the cash flows are clearly defined, and then discount by selling those receivables to a bank or factor. In this setup, the lessor receives the present value of the payment stream immediately, while the bank or factor collects the future payments. The asset itself may stay with the lessor or be transferred depending on structure, but the essential sequence is originate, document, then discount. The other descriptions don’t reflect this order or the typical monetization of the lease receivables.

Discounting monetizes future lease payments by turning them into cash today. The typical flow is to originate the lease with the lessee, document the agreement so the cash flows are clearly defined, and then discount by selling those receivables to a bank or factor. In this setup, the lessor receives the present value of the payment stream immediately, while the bank or factor collects the future payments. The asset itself may stay with the lessor or be transferred depending on structure, but the essential sequence is originate, document, then discount. The other descriptions don’t reflect this order or the typical monetization of the lease receivables.