高级公司金融Leasing.ppt

DRAFT,,CONFIDENTIAL,CHAPTER 3,Leasing,Chapter Outline,3.1 Types of Leases 3.2 Accounting and Leasing 3.3 Taxes, the IRS, and Leases 3.4 The Cash Flows of Leasing 3.5 NPV Analysis of the Lease-versus-Buy Decision 3.6 Debt Displacement and Lease Valuation 3.7 APV Approach to Leasing 3.8 Does Leasing Ever Pay: The Base Case 3.9 Reasons for Leasing 3.10 Some Unanswered Questions 3.11 Summary and Conclusions,3.1 Types of Leases,The Basics A lease is a contractual agreement between a lessee and lessor. The lessor owns the asset and for a fee allows the lessee to use the asset. For the lessee, it is the use of the asset that is the most important. Leasing and buying involve alternative financing arrangements for the use of an asset. Direct leasing: the lessor is an independent leasing company who purchase the asset. Sales-type leasing: the manufacturer leases it own products.,Buying versus Leasing,,Operating Leases,Usually not fully amortized. The term or life of the operating lease is usually less than the economic life of the asset. Usually require the lessor to maintain and insure the asset. Lessee enjoys a cancellation option.,Financial Leases (Capital Leases),The exact opposite of an operating lease. Do not provide for maintenance or service by the lessor. Financial leases are fully amortized. The lessee usually has a right to renew the lease at expiry. Generally, financial leases cannot be cancelled. Two special types of financial lease Sale and leaseback Leveraged lease,Sale and Lease-Back,Occurs when a company sells an asset it already owns to another firm and immediately leases it from them. Two sets of cash flows occur: The lessee receives cash today from the sale. The lessee agrees to make periodic lease payments, thereby retaining the use of the asset.,Leveraged Leases,A three-sided arrangement between the lessee, the lessor, and lenders. The lessor owns the asset and for a fee allows the lessee to use the asset. The lessor borrows to partially finance the asset. The lenders typically use a non-recourse loan. This means that the lessor is not obligated to the lender in case of a default by the lessee. The lender is protected in two ways: The lender has a first lien on the asset In the event of loan default the lease payments are made directly to the lender,Leveraged Leases,,Lessor buys asset, Firm U leases it.,The lenders typically use a nonrecourse loan. This means that the lessor is not obligated to the lender in case of a default,Lessor borrows from lender to partially finance purchase,In the event of a default by the lessor, the lender has a first lien on the asset. Also the lease payments are made directly to the lender after a default.,3.2 Accounting and Leasing,In the old days (before November 1976), leases led to off-balance-sheet financing. In November 1976, FASB issued FAS 13, leases are either classified as capital leases or operating leases. Operating leases do not appear on the balance sheet. Capital leases appear on the balance sheet—the present value of the lease payments appears on both sides.,Accounting and Leasing,An Example: Some years ago, a firm issued $100,000 of equity to purchase land. It now wants to use a $100,000 truck, which it can either purchase or lease. The balance sheets reflecting the purchase, operating lease and capital lease are in the next slides. What are the effects in terms of accounting if lease is not reported in the balance sheet? The firm looks financially stronger because liability is lower. The firm has higher performance because assets is lower. Given the choice, a firm will classify all leases as operating leases.,Balance Sheet Truck is purchased with debt Truck $100,000 Debt $100,000 Land $100,000 Equity $100,000 Total Assets $200,000 Total Debt & Equity $200,000Operating Lease Truck Debt Land $100,000 Equity $100,000 Total Assets $100,000 Total Debt & Equity $100,000Capital Lease Assets leased $100,000 Obligations under capital lease $100,000 Land $100,000 Equity $100,000 Total Assets $200,000 Total Debt & Equity $200,000,Consider a firm with two assets: a truck and some land.,Accounting and Leasing,FASB’s Definition of Capital Lease,FAS 13 states that a lease must be classified as capital one if any one of the following is met: The present value of the lease payments is at least 90 percent of the fair market value of the asset at the start of the lease. The lease transfers ownership of the property to the lessee by the end of the term of the lease. The lease term is 75 percent or more of the estimated economic life of the asset. The lessee can buy the asset at a bargain price at expiry.,3.3 Taxes, the IRS, and Leases,The principal benefit of long-term leasing is tax reduction. The payments of buying an asset should be capitalized; it is not tax deductible. The periodic payments for lease is an expense; it is tax deductible. The lessee can deduct lease payments for income tax purposes only if the lease is qualified by the Internal Revenue Service (IRS).,。