高级公司金融Leasing.ppt

DRAFT CONFIDENTIAL CHAPTER3 Leasing ChapterOutline 3 1TypesofLeases3 2AccountingandLeasing3 3Taxes theIRS andLeases3 4TheCashFlowsofLeasing3 5NPVAnalysisoftheLease versus BuyDecision3 6DebtDisplacementandLeaseValuation3 7APVApproachtoLeasing3 8DoesLeasingEverPay TheBaseCase3 9ReasonsforLeasing3 10SomeUnansweredQuestions3 11SummaryandConclusions 3 1TypesofLeases TheBasicsAleaseisacontractualagreementbetweenalesseeandlessor Thelessorownstheassetandforafeeallowsthelesseetousetheasset Forthelessee itistheuseoftheassetthatisthemostimportant Leasingandbuyinginvolvealternativefinancingarrangementsfortheuseofanasset Directleasing thelessorisanindependentleasingcompanywhopurchasetheasset Sales typeleasing themanufacturerleasesitownproducts BuyingversusLeasing OperatingLeases Usuallynotfullyamortized Thetermorlifeoftheoperatingleaseisusuallylessthantheeconomiclifeoftheasset Usuallyrequirethelessortomaintainandinsuretheasset Lesseeenjoysacancellationoption FinancialLeases CapitalLeases Theexactoppositeofanoperatinglease Donotprovideformaintenanceorservicebythelessor Financialleasesarefullyamortized Thelesseeusuallyhasarighttorenewtheleaseatexpiry Generally financialleasescannotbecancelled TwospecialtypesoffinancialleaseSaleandleasebackLeveragedlease SaleandLease Back Occurswhenacompanysellsanassetitalreadyownstoanotherfirmandimmediatelyleasesitfromthem Twosetsofcashflowsoccur Thelesseereceivescashtodayfromthesale Thelesseeagreestomakeperiodicleasepayments therebyretainingtheuseoftheasset LeveragedLeases Athree sidedarrangementbetweenthelessee thelessor andlenders Thelessorownstheassetandforafeeallowsthelesseetousetheasset Thelessorborrowstopartiallyfinancetheasset Thelenderstypicallyuseanon recourseloan Thismeansthatthelessorisnotobligatedtothelenderincaseofadefaultbythelessee Thelenderisprotectedintwoways ThelenderhasafirstlienontheassetIntheeventofloandefaulttheleasepaymentsaremadedirectlytothelender LeveragedLeases Lessorbuysasset FirmUleasesit Thelenderstypicallyuseanonrecourseloan Thismeansthatthelessorisnotobligatedtothelenderincaseofadefault Lessorborrowsfromlendertopartiallyfinancepurchase Intheeventofadefaultbythelessor thelenderhasafirstlienontheasset Alsotheleasepaymentsaremadedirectlytothelenderafteradefault 3 2AccountingandLeasing Intheolddays beforeNovember1976 leasesledtooff balance sheetfinancing InNovember1976 FASBissuedFAS13 leasesareeitherclassifiedascapitalleasesoroperatingleases Operatingleasesdonotappearonthebalancesheet Capitalleasesappearonthebalancesheet thepresentvalueoftheleasepaymentsappearsonbothsides AccountingandLeasing AnExample Someyearsago afirmissued 100 000ofequitytopurchaseland Itnowwantstousea 100 000truck whichitcaneitherpurchaseorlease Thebalancesheetsreflectingthepurchase operatingleaseandcapitalleaseareinthenextslides Whataretheeffectsintermsofaccountingifleaseisnotreportedinthebalancesheet Thefirmlooksfinanciallystrongerbecauseliabilityislower Thefirmhashigherperformancebecauseassetsislower Giventhechoice afirmwillclassifyallleasesasoperatingleases BalanceSheetTruckispurchasedwithdebtTruck 100 000Debt 100 000Land 100 000Equity 100 000TotalAssets 200 000TotalDebt Equity 200 000OperatingLeaseTruckDebtLand 100 000Equity 100 000TotalAssets 100 000TotalDebt Equity 100 000CapitalLeaseAssetsleased 100 000Obligationsundercapitallease 100 000Land 100 000Equity 100 000TotalAssets 200 000TotalDebt Equity 200 000 Considerafirmwithtwoassets atruckandsomeland AccountingandLeasing FASB sDefinitionofCapitalLease FAS13statesthataleasemustbeclassifiedascapitaloneifanyoneofthefollowingismet Thepresentvalueoftheleasepaymentsisatleast90percentofthefairmarketvalueoftheassetatthestartofthelease Theleasetransfersownershipofthepropertytothelesseebytheendofthetermofthelease Theleasetermis75percentormoreoftheestimatedeconomiclifeoftheasset Thelesseecanbuytheassetatabargainpriceatexpiry 3 3Taxes theIRS andLeases Theprincipalbenefitoflong termleasingistaxreduction Thepaymentsofbuyinganassetshouldbecapitalized itisnottaxdeductible Theperiodicpaymentsforleaseisanexpense itistaxdeductible ThelesseecandeductleasepaymentsforincometaxpurposesonlyiftheleaseisqualifiedbytheInternalRevenueService IRS TheguidelinesfromtheIRS Thetermmustbelessthan30years Therecanbenobargainpurchaseoption Theleaseshouldnothaveascheduleofpaymentsthatisveryhighatthestartoftheleaseandlowthereafter Theleasepaymentsmustprovidethelessorwithafairmarketrateofreturn Theleaseshouldnotlimitthelessee srighttoissuedebtorpaydividends Renewaloptionsmustbereasonableandreflectfairmarketvalueoftheasset 3 4TheCashFlowsofLeasing Anexample XomoxCorportation whichmanufacturespipe wishestoacquireapipe boringmachine Themachinecanbepurchasedat 10 000andhasausefullifeof5years ItisexpectedtosaveXomox 6 000peryearinreducedelectricitybillsforthenextfiveyears Thesesavingsareknowwithcertainty Xomoxhasacorporatetaxrateof34percent Weassumethatfive yearstraight linedepreciationisusedforthemachine anditwillbeworthlessafterfiveyear However Xomoxcanalsoleasethesamepipe boringmachinefromFriendlyLeasingforfiveyearswithanannualleasepaymentof 2 500 CashFlows BuyversusLease CashFlows LeaseMinusBuy Operatingcostsarenotdirectlyaffectedbyleasing IfXomoxleasesthemachine itsavestheinitialcashoutflowofpurchasing butithastopaytheleasefeesinthelater IfXomoxleasesthemachine itnolongerownstheassetandhastogiveupthetaxshieldfromdepreciation Butitenjoysthetaxdeductionfromleasepayment WhetherleasingissuperiortobuyingdependsontheNPVoftheleasingminusbuyanalysis TheDiscountRateofLeasing DiscountrateforleasepaymentAleasepaymentislikethedebtserviceonasecuredbondissuedbythelessee Thereturnofthesecureddebtissuedbythelesseeshouldbeusedasthediscountratefortheleasepayment Inaworldwithtax thatreturnistheaftertaxinterestrateonthesecureddebtissuedbythelessee Theaftertaxinterestrateonthesecureddebtusedtodiscountleasepaymentisslightlyhigherthantheriskfreerate DiscountratefordepreciationtaxshieldThetaxshieldsrisingfromdepreciationareriskierthanleasepayment First taxshielddependsonwhetherfirmscangenerateenoughtaxableincometousethem Second taxratemaychangeovertime Intherealworld manycompaniesdiscountboththedepreciationtaxshieldsandtheleasepaymentsattheafter taxinterestrateonsecureddebtissuedbythelessee Financialpractitionersviewthesetworisksasminor 3 5NPVAnalysisoftheLeasevs BuyDecision Supposetheinterestrateonsecureddebtissuedbythelesseeis7 57575percentandaftertaxrateis5percent NPVLeasingInsteadofBuying 10 000 2 330 A 5 5 87 68Purchasingisbetterthanlease 3 6DebtDisplacementandLeaseValuation DebtdisplacementIfafirmleases futureleasepaymentsconstitutefirmliabilities thefirmcannotuseasmuchregulardebtasitwouldotherwise Wesayleasesdisplacedebt Thisisahiddencostofleasing becausetheinteresttaxshieldwillbelost DebtDisplacementandLeaseValuation FortheXomoxexample ItXomoxpurchasethemachine itwillhave 2 330morecashflowsperyearfromyear1 5thanifitleases Thesecashflowscansupportadditionaldebtlevelof 10 087 68atyear0 TheadditionalcashinflowsassociatedwithbuyingrelativetoleasinginfutureincreasestheXomox sdebtcapacityby 10 087 68today 504 10 087 68 5 8 262 06 10 087 68 1825 62 1 825 62 2 330 504 38 CalculationofIncreaseinDebtLevelIfPurchasesInsteadofLease BuyingversusLeasing ADifferentPerspective Thecashflowsfromyear1 5ofpurchasingthemachineandhavingadditional 10 087 68debtareexactlythesameasthoseunderleasing Howeverthecashflowsdifferbetweenthetwoalternativesatyear0 Underpurchasingandborrowingarrangement Xomoxhas 10 087 68cashinflowfromborrowingandspend 10 000onpurchasing Thenetcashinflowis 87 68 Undertheleasingarrangement Xomoxhas0cashflowatyear0 Purchasingispreferredtoleasing 3 7APVApproachtoLeasing APV All EquityValue FinancingNPVTofindtheall equityvalue discountthecashflowsatthepre taxinterestrate 7 57575percent All EquityValue 10 000 2 330 A 7 57575 5 10 000 9 407 97 592 03 APV All EquityValue FinancingNPVTheNPVofthefinancingistheinteresttaxshieldsontheadditionaldebtthatXomoxhasifitchoosesbuyingthemachinerelativetoleasing Bypurchasingthemachinerelativetoleasing Xomoxcanhaveadditionaldebtof 10 087 68 Theinteresttaxshieldgeneratedbythisadditionaldebtinthefollowing5yearisshowninthefollowingtable ThepresentvalueofFinancingNPVcouldbegotbydiscountingthesetaxshieldusingpre taxinterestrate APV 592 03 679 71 87 68 3 8DoesLeasingEverPay TheBaseCase CashFlowstoFriendlyLeasingasLessorThecashoutflowofpurchasingthemachine 10 000Thecashinflowofdepreciationtaxshield 2 000 34 680TheaftertaxleasepaymentfromXomox 2 500 1 34 1 650 NPV 10 000 2 330 A 5 5 87 68 IntheXomoxcase ifXomoxchoosestoleasethemachinefromFriendlyLeasing thecashflowsofthelesseeandlessorareexactlytheopposite ThejointNPVofthelesseeandlessoriszero Thegeneralprinciple aslongasBothpartiesaresubjecttothesameinterestandtaxratesTransactioncostsareignored Therecanbenoleasingdealthatbenefitsbothparties 3 9ReasonsforLeasing GoodReasonsTaxesmaybereducedbyleasing Theleasecontractmayreducecertaintypesofuncertainty Transactionscostscanbehigherforbuyinganassetandfinancingitwithdebtorequitythanforleasingtheasset BadReasonsAccountingOnehundredpercentfinancing ATaxArbitrage Thetaxadvantageofleasingexistiffirmsareindifferenttaxbrackets Shouldauserinalowtaxbracketpurchase hewillhavelittletaxbenefitfromdepreciationandinterestdeductions Shouldtheuserlease thelessorwillreceivethedepreciationshieldandinterestdeduction Thetwopartiescannegotiatetoreachalowerleasepaymenttobenefitboth TheNPVanalysisofLessee AssumeintheXomoxcase Xomoxpaysnotax taxrateiszero andafternegotiatingwithFriendleyleasingtheleasepaymentisreducedfrom 2 500to 2 475 Thecashflowsofleasingvs buyingforXomoxisasfollows NPV 10 000 2 475 A 5 5 6 55 Xomoxwillchoosetoleasethemachineinsteadofbuying TheNPVAnalysisofLessor ThecashflowsofFriendlyLeasingisasthefollows NPV 10 000 2 313 5 A 5 5 16 24 Friendlyleasingbenefitsasalessor ReservationPaymentofLessee Reservationpaymentoflessee LMAX isthepaymentthatmakesthevalueoftheleasetothelesseezero sothatthelesseeisindifferentbetweenleasingandbuying Valueoflease 0 10 000 LMAX A 5 5 LMAX 2 476 62 ReservationPaymentofLessor Reservationpaymentoflessor LMIN isthepaymentthatmakesthevalueoftheleasetothelessorzero sothatthelessorisindifferentbetweenleasingornot Valueoflease 0 10 000 LMIN A