公司理财chap021

1、McGraw-Hill/IrwinCopyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved CHAPTER21LeasingSlide 2Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinKey Concepts and Skills Understand the different types of leases. Understand how to apply NPV to the le

2、ase vs. buy decision. Understand the importance of tax rates in determining the benefit of leasing.Slide 3Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinChapter Outline21.1 Types of Leases21.2 Accounting and Leasing21.3 Taxes, the IRS, and Leases21.4 The Cash

3、Flows of Leasing21.5 A Detour on Discounting and Debt Capacity with Corporate Taxes21.6 NPV Analysis of the Lease-versus-Buy Decision21.7 Debt Displacement and Lease Valuation21.8 Does Leasing Ever Pay: The Base Case21.9 Reasons for Leasing21.10 Some Unanswered QuestionsSlide 4Copyright 2008 by The

4、McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/Irwin21.1 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.Slide 5Copyright 2008 by The McGraw-Hill Companies, Inc. All rig

5、hts reserved McGraw-Hill/IrwinBuying versus LeasingBuyLeaseFirm U buys asset and uses asset; financed by debt and equity.Lessor buys asset, Firm U leases it.Manufacturer of assetEquity shareholdersFirm UUses assetOwns assetCreditorsManufacturer of assetLessor1. Owns asset2. Does not use assetEquity

6、shareholdersCreditorsLessee (Firm U)1. Uses asset2. Does not own assetSlide 6Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinOperating Leases Usually not fully amortized Usually require the lessor to maintain and insure the asset Lessee enjoys a cancellation op

7、tionSlide 7Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinFinancial LeasesThe 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

8、 expiry.1. Generally, financial leases cannot be cancelled.Slide 8Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinSale and Lease-Back A particular type of financial lease Occurs when a company sells an asset it already owns to another firm and immediately lease

9、s 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.Slide 9Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinLeveraged Leases A lever

10、aged lease is another type of financial lease. 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 nonrecourse loan. This mean

11、s that the lessor is not obligated to the lender in case of a default by the lessee.Slide 10Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinLeveraged LeasesLessor buys asset, Firm U leases it. Manufacturer of assetLessor1. Owns asset2. Does not use assetEquity

12、shareholdersCreditorsLessee (Firm U)1. Uses asset2. Does not own assetThe lenders typically use a nonrecourse loan. This means that the lessor is not obligated to the lender in case of a default by the lessee.Lessor borrows from lender to partially finance purchaseIn the event of a default by the le

13、ssor, the lender has a first lien on the asset. Also, the lease payments are made directly to the lender after a default.Slide 11Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/Irwin21.2 Accounting and Leasing In the old days, leases led to off-balance-sheet financi

14、ng. Today, 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 sheetthe present value of the lease payments appears on both sides.Slide 12Copyright 2008 by The McGraw-Hill Companies, Inc. All righ

15、ts reserved McGraw-Hill/IrwinAccounting and Leasing (Balance Sheet)Truck is purchased with debtTruck$100,000Debt$100,000Land$100,000Equity$100,000Total Assets$200,000Total Debt & Equity $200,000Operating LeaseTruckDebtLand$100,000Equity$100,000Total Assets$100,000Total Debt & Equity $100,000

16、Capital LeaseAssets leased$100,000Obligations under capital lease $100,000Land$100,000Equity$100,000Total Assets$200,000Total Debt & Equity$200,000Slide 13Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinCapital Lease A lease must be capitalized if any one o

17、f 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 estimat

18、ed economic life of the asset. The lessee can buy the asset at a bargain price at expiry.Slide 14Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/Irwin21.3 Taxes, the IRS, and Leases The principal benefit of long-term leasing is tax reduction. Leasing allows the tran

19、sfer of tax benefits from those who need equipment but cannot take full advantage of the tax benefits of ownership to a party who can. Naturally, the IRS seeks to limit this, especially if the lease appears to be set up solely to avoid taxes.Slide 15Copyright 2008 by The McGraw-Hill Companies, Inc.

20、All rights reserved McGraw-Hill/IrwinTaxes, the IRS, and LeasesThe lessee can deduct lease payments if the lease is qualified by the IRS.The term must be less than 30 years.There can be no bargain purchase option.The lease should not have a schedule of payments that is very high at the start of the

21、lease and low thereafter. The lease payments must provide the lessor with a fair market rate of return.The lease should not limit the lessees right to issue debt or pay dividends.1. Renewal options must be reasonable and reflect fair market value of the asset.Slide 16Copyright 2008 by The McGraw-Hil

22、l Companies, Inc. All rights reserved McGraw-Hill/Irwin21.4 The Cash Flows of LeasingConsider a firm, ClumZee Movers, that wishes to acquire a delivery truck.The truck is expected to reduce costs by $4,500 per year.The truck costs $25,000 and has a useful life of 5 years.If the firm buys the truck,

23、they will depreciate it straight-line to zero. They can lease it for 5 years from Tiger Leasing with an annual lease payment of $6,250.Slide 17Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinThe Cash Flows of Leasing Cash Flows: Buy Year 0 Years 1-5Cost of truc

24、k$25,000After-tax savings 4,500(1-.34) = $2,970Depreciation Tax Shield_5,000(.34) = $1,700 $25,000$4,670 Cash Flows: Lease Year 0 Years 1-5Lease Payments6,250(1-.34) = $4,125After-tax savings4,500(1-.34) = $2,970 $1,155Slide 18Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McG

25、raw-Hill/IrwinThe Cash Flows of LeasingCash Flows: Leasing Instead of BuyingYear 0 Years 1-5$25,000$1,155 $4,670 = $5,825We could also view the cash flows as buying minus leasing, which would simply change the signs on the cash flows.The discount rate is the aftertax rate on the firms secured debt.S

26、lide 19Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/Irwin21.5 A Detour on Discounting and Debt Capacity with Corporate Taxes Present Value of Riskless Cash Flows In a world with corporate taxes, firms should discount riskless cash flows at the aftertax riskless r

27、ate of interest. Optimal Debt Level and Riskless Cash Flows In a world with corporate taxes, one determines the increase in the firms optimal debt level by discounting a future guaranteed aftertax inflow at the aftertax riskless interest rate.Slide 20Copyright 2008 by The McGraw-Hill Companies, Inc.

28、 All rights reserved McGraw-Hill/Irwin21.6 NPV Analysis of the Lease-vs.-Buy Decision A lease payment is like the debt service on a secured bond issued by the lessee. In the real world, many companies discount both the depreciation tax shields and the lease payments at the aftertax interest rate on

29、secured debt issued by the lessee.Slide 21Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinNPV Analysis of the Lease-vs.-Buy Decision There is a simple method for evaluating leases: discount all cash flows at the aftertax interest rate on secured debt issued by

30、the lessee. Suppose that rate is 5 percent.NPV Leasing Instead of BuyingYear 0Years 1-5$25,000 $1,155 $4,670 = $5,825CF1F1CF05$5,825$219.20$25,000INPV5Slide 22Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinNPV Analysis of the Lease-vs.-Buy DecisionNPV Buying I

31、nstead of Leasing Year 0Years 1-5 $25,000 $4,670 $1,155 = $5,825CF1F1CF05$5,825$219.20$25,000INPV5Slide 23Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/Irwin21.7 Debt Displacement and Lease Valuation Considering the issues of debt displacement allows for a more in

32、tuitive understanding of the lease versus buy decision. Leases displace debtthis is a hidden cost of leasing. If a firm leases, it will not use as much regular debt as it would otherwise. The interest tax shield will be lost.Slide 24Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserv

33、ed McGraw-Hill/IrwinDebt Displacement and Lease Valuation The debt displaced by leasing results in forgone interest tax shields on the debt that ClumZee movers did not take on when they leased instead of bought the truck. Suppose ClumZee agrees to a lease payment of $6,250 before tax. This payment w

34、ould support a loan of $25,219.20 (see the next slide). In exchange for this, they get the use of a truck worth $25,000. Clearly the NPV is a negative $219.20, which agrees with our earlier calculations.Slide 25Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinDe

35、bt Displacement and Lease ValuationCalculate the increase in debt capacity by discounting the difference between the cash flows of the purchase and the cash flows of the lease using the aftertax interest rate.PMTNPV5$5,825$25,219.20I/YrFV50Forgone Depreciation Tax Shield 5,000(.34) = $1,700$5,825Aft

36、er-Tax Lease Payments 6,250(1 .34) = $4,125Slide 26Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/Irwin21.8 Does Leasing Ever Pay: The Base Case In the above example, ClumZee Movers chose to buy, because the NPV of leasing was a negative $219.20 Note that this is t

37、he opposite of the NPV that Tiger Leasing would have:CF1F1CF05$5,825$219.20$25,000INPV5 Cash Flows: Tiger LeasingYear 0Years 15Cost of truck$25,000Depreciation Tax Shield5,000(.34) = $1,700Lease Payments6,250(1-.34) = $4,125$25,000 $5,825Slide 27Copyright 2008 by The McGraw-Hill Companies, Inc. All

38、rights reserved McGraw-Hill/Irwin21.9 Reasons for Leasing Good Reasons Taxes may be reduced by leasing. The lease contract may reduce certain types of uncertainty. Transactions costs can be higher for buying an asset and financing it with debt or equity than for leasing the asset. Bad Reasons Accoun

39、tingSlide 28Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinA Tax Arbitrage Suppose ClumZee movers is actually in the 25% tax bracket and Tiger Leasing is in the 34% tax bracket. If Tiger reduces the lease payment to $6,200, can both firms have a positive NPV?

40、Cash Flows: Tiger LeasingYear 0Years 1-5Cost of truck$25,000Depreciation Tax Shield5,000(.34) = $1,700Lease Payments6,200(1 .34) = $4,092 $25,000 $5,792NPV = 76.33Slide 29Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinA Tax ArbitrageCash Flows ClumZee Movers:

41、Leasing Instead of BuyingYear 0 Years 1-5Cost of truck we didnt buy$25,000Lost Depreciation Tax Shield 5,000(.25) = $1,250After-Tax Lease Payments 6,200(1 .25) = $4,650 $25,000 $5,900NPV = -$543.91Slide 30Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinTiger Le

42、asings Breakeven Payment What is the smallest lease payment that Tiger Leasing will accept? Set their NPV to zero and solve for $Lmin:Year 0 Years 1-5Cost of truck-$25,000Depreciation Tax Shield5,000(.34) = $1,700Lease Payments$Lmin (1 .34) = $Lmin (1 .34) -$25,000 $1,700 + $Lmin (1 .34) 51min)05. 1

43、 (700, 1$66.000,25$0ttLNPV5151min)05. 1 (700, 1$)05. 1 (1$66.000,25$ttttL5151min)05. 1 (1$66.)05. 1 (700, 1$000,25$ttttL29.173, 6$minLSlide 31Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/IrwinTiger Leasings Breakeven PaymentStep one is to find the aftertax cost of the truck.Step two is to find the aftertax payment required.CF1F1CF05$1,700$17,639.8925,000I