Capital vs. Expense question question, following, opposite, net

therecruit

I saw this in a Schweser exam…
Which of the following is an effect of capitaliztion:
1. Assset Turnover Higher
2. Debt to Equity Higher
3. Operating CF Lower
4. Net Income Variabilitiy over the life of the lease Lower
I chose 4, but the answer was 2. Anyone think this is incorrect? The answer stated the following “net income variability over the life of the lease will be higher if it is capitalized.” I thought the opposite was true.

lc26mizzou

for leases…operating lease will have less variability….the same operating expense every year or month. When you capitalize, interest exp changes over the life of the lease.
When you capitalize your NI is lower in early years =lower equity =higher debt to equity ratio

marsilni

Are we talking about leases or expense?