Presentation is loading. Please wait.

Presentation is loading. Please wait.

©2012 McGraw-Hill Ryerson Limited 1 of 35 Learning Objectives 4.Outline some of the features of innovative forms of raising long-term financing, including.

Published byBenjamin Lyons Modified over 9 years ago

Similar presentations

Presentation on theme: "©2012 McGraw-Hill Ryerson Limited 1 of 35 Learning Objectives 4.Outline some of the features of innovative forms of raising long-term financing, including."— Presentation transcript:

1 ©2012 McGraw-Hill Ryerson Limited 1 of 35 Learning Objectives 4.Outline some of the features of innovative forms of raising long-term financing, including zero-coupon rate bonds, floating rate bonds and real return bonds. (LO4) 5.Outline the characteristics of long-term lease financing that make it an alternative form of long-term financing. (LO5) 6.Analyze a lease-versus-borrow-to- purchase decision. (LO6)

2 ©2012 McGraw-Hill Ryerson Limited 2 of 35 Table 16-6 Net Present Value of Borrow-Purchase LO6 Year (1) Payment (2) Loan Interest (3) Interest Tax Shield (2) X 0.4 (4) Aftertax Cost of (1) + (3) (5) Present Value at 6% 1($1,319)$500*$200($1,119)($1,056) 2 (1,319)418 167(1,152) (1,025) 3 (1,319)328 131(1,188) (997) 4 (1,319)229 92(1,227) (972) 5 (1,319)120 48(1,271) (950) (5,000) *$5,000 x 10% = $500

3 ©2012 McGraw-Hill Ryerson Limited 3 of 35 Table 16-7 Net Present Value of Operating Lease Outflows LO6 YearTax PaymentShield Aftertax Cost of Leasing Present Value at 6% 0($1,295)$0($1,295) 1 (1,295)518 (777) (733) 2 (1,295)518 (777) (692) 3 (1,295)518 (777) (652) 4 (1,295)518 (777) (615) 5 0518 387 ($3,600) We can use the calculator and simplify the process 0-4 Lease payments PMT(BGN) = (1,295), N = 5, I/Y = 6%, FV = 0 (5,782) 1-5 Tax savings PMT(END) = 518, N = 5, I/Y = 6%, FV = 0 2,182 PV of leasing (3,600)

4 ©2012 McGraw-Hill Ryerson Limited 4 of 35 Table 16-8 Summary of lease versus borrow to purchase analysis LO6 Borrow-to-Purchase Alternative Cost of asset(5,000) PV of CCA shield1,495 PV of borrowing(3,505) Operating Lease Alternative 0-4 Lease payments PMT(BGN) = (1,295), N = 5, I/Y = 6%, FV = 0 (5,782) 1-5 Tax savings PMT(END) = 518, N = 5, I/Y = 6%, FV = 0 2,182 PV of leasing(3,600) NPV of borrow-to-purchase $95

Download ppt "©2012 McGraw-Hill Ryerson Limited 1 of 35 Learning Objectives 4.Outline some of the features of innovative forms of raising long-term financing, including."

Similar presentations

© Mcgraw-Hill Companies, 2008 Farm Management Chapter 17 Investment Analysis.

© Mcgraw-Hill Companies, 2008 Farm Management Chapter 17 Investment Analysis.
©2012 McGraw-Hill Ryerson Limited 1 of 37 Learning Objectives 1.Explain the concept of the time value of money. (LO1) 2.Calculate present values, future.

©2012 McGraw-Hill Ryerson Limited 1 of 37 Learning Objectives 1.Explain the concept of the time value of money. (LO1) 2.Calculate present values, future.
FIN 614: Financial Management Larry Schrenk, Instructor.

FIN 614: Financial Management Larry Schrenk, Instructor.
1 of 24 ©2012 McGraw-Hill Ryerson Limited Learning Objectives 3.Outline the many factors to be considered in dividend policy. Calculate aftertax income.

1 of 24 ©2012 McGraw-Hill Ryerson Limited Learning Objectives 3.Outline the many factors to be considered in dividend policy. Calculate aftertax income.
Multiple Cash Flows FV Example 1 continued

Multiple Cash Flows FV Example 1 continued
1 Leases. What is a Lease? A lease is a contract where the lessor agrees to let the lessee use their asset in exchange for compensation  Lessee: Needs.

1 Leases. What is a Lease? A lease is a contract where the lessor agrees to let the lessee use their asset in exchange for compensation  Lessee: Needs.
11 - 1 ©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton Chapter 11 Capital Budgeting.

©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton Chapter 11 Capital Budgeting.
1 CHAPTER 18 Lease Financing. 2 Topics in Chapter Types of leases Tax treatment of leases Effects on financial statements Lessee’s analysis Lessor’s analysis.

1 CHAPTER 18 Lease Financing. 2 Topics in Chapter Types of leases Tax treatment of leases Effects on financial statements Lessee’s analysis Lessor’s analysis.
©2012 McGraw-Hill Ryerson Limited 1 of 39 Learning Objectives 5.Explain financing of assets in terms of hedging. (LO5) 6.Describe the term structure of.

©2012 McGraw-Hill Ryerson Limited 1 of 39 Learning Objectives 5.Explain financing of assets in terms of hedging. (LO5) 6.Describe the term structure of.
INVESTMENT ANALYSIS PRACTICE PROBLEM. A fertilizer dealer is considering the purchase of a new piece of equipment the will allow him to vary the application.

INVESTMENT ANALYSIS PRACTICE PROBLEM. A fertilizer dealer is considering the purchase of a new piece of equipment the will allow him to vary the application.
ADAPTED FOR THE SECOND CANADIAN EDITION BY: THEORY & PRACTICE JIMMY WANG LAURENTIAN UNIVERSITY FINANCIAL MANAGEMENT.

ADAPTED FOR THE SECOND CANADIAN EDITION BY: THEORY & PRACTICE JIMMY WANG LAURENTIAN UNIVERSITY FINANCIAL MANAGEMENT.
Key Concepts and Skills

Key Concepts and Skills
© The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw Hill 25- 1  What is a Lease?  Why Lease?  Operating Leases  Valuing Financial Leases  When Do.

© The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw Hill  What is a Lease?  Why Lease?  Operating Leases  Valuing Financial Leases  When Do.
Chapter McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 26 Leasing.

Chapter McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 26 Leasing.
Chapter 13 Cash Flow Budgeting

Chapter 13 Cash Flow Budgeting
© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Making Capital Investment Decisions Chapter Ten.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Making Capital Investment Decisions Chapter Ten.
©2012 McGraw-Hill Ryerson Limited 1 of 45 Learning Objectives 4.Appraise the use of the cost of capital as the discount rate in capital budgeting analysis.

©2012 McGraw-Hill Ryerson Limited 1 of 45 Learning Objectives 4.Appraise the use of the cost of capital as the discount rate in capital budgeting analysis.
Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 Chapter Three Opportunity Cost of Capital and of Capital and Capital Budgeting.

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 Chapter Three Opportunity Cost of Capital and of Capital and Capital Budgeting.
© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Financial Statements, Taxes and Cash Flow Prepared by Anne Inglis, Ryerson University Chapter.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Financial Statements, Taxes and Cash Flow Prepared by Anne Inglis, Ryerson University Chapter.
Lease Analysis A contract between two parties called lessor and lessee, whereby lessee gets the right to use an asset provided by the lessor in return.

Lease Analysis A contract between two parties called lessor and lessee, whereby lessee gets the right to use an asset provided by the lessor in return.

Similar presentations

Ads by Google