LeasingBab 7 MK 2

May 2007

Definisi

Lease: suatu persetujuan tertulis yang memberikan kesempatan penggunaan asset2 yang berupa barang modal selama periode tertentu tanpa menerima hak atas asset tsb.

The lessee, who uses the asset and makes the lease, or rental, payments.

The lessor, who owns the asset and receives the rental payments.

Note that the lease decision is a financing decision for the lessee and an investment decision for the lessor.

Who are the two parties to a lease transaction?

1. Operating lease– Short-term and normally cancelable– Maintenance usually included– Not fully amortized. The rental payments are not sufficient

for the lessor to recover the full cost of the asset. However, the lease contract is shorther than the expected economic life of the asset, so the lessor can sell the asset or re-lease it to other lessee

– Examples: computer, copying machine, cars, trucks and aircrafts.

What are the four primary lease types?

Type of Lease2. Financial lease

– Long-term and normally noncancelable– Maintenance usually not included– Fully amortized. That is, the lessor receives rental

payments equal to the full price of the asset plus a return on invested capital.

– The lesse pays property taxes and insurance

Type of Lease

3. Sale and leaseback- A firm that owns land, buildings, or equipment sells the property to another firm and simultaneously executes an agreement to lease the property back for a stated period under specific terms.- almost the same as financial leases, the difference is that the leased equipment is used, not new, and the lessor buys it from the user-lesse instead of manufacturer or a distributor

Type of Lease

4. Combination lease- Combination of operating of financial lease- Combine some features of each- Example: financial leases also contain

cancellation clauses ( must pay penalty payments if cancelling before the end of the leasing period )

Example

Thompson-Grammatikos Compnay (TGC) requires the use of a two-year aset that costs $100. TGC can borrow $100 at an interest rate of 10%, with payments of $10 each year and a principle payment of $100 at Year-2.

For simplicity, assume straight-line depreciation of $50 per year. The tax rate is 40%.

If TGC leases the asset, the lease payment is $55 due at the end of each year.

Example

Input Data (all dollar figures in thousands) New Equipment cost $100 New Equipment life 2 Equip. Salvage Value $0 Tax Rate 40% Loan interest rate 10% Annual rental charge $55 Depreciation $50 After-tax cost of debt 6%

Answer

7273747576777879808182838485868788

A B C D E FYear = 0 1 2

Cost of OwningEquipment cost ($100)Loan amount $100Interest expense ($10) ($10)Tax savings from interest 4 4Principal repayment ($100)Tax savings from depr. $20 $20Net cash flow $0 $14 ($86)PV ownership cost @ 6% ($63,33)

Cost of LeasingLease payment ($55) ($55)Tax savings from lease $22 $22Net cash flow $0 ($33) ($33)PV of leasing @ 6% ($60,50)

Answer

Cost ComparisonPV ownership cost @ 6% ($63,33)PV of leasing @ 6% ($60,50)Net Advantage to Leasing $2,83

The company should lease this asset!

If the equipment is leased:– Firm could obtain a 4-year lease which

includes maintenance.– Lease meets IRS guidelines to expense

lease payments.– Rental payment would be $280,000 at the

beginning of each year.

Assume that Lewis Securities plansto acquire some new equipment

having a 4-year useful life.

Other information:

– Equipment cost: $1,000,000.– Loan rate on equipment = 10%.– Marginal tax rate = 40%.– 3-year MACRS life.– If company borrows and buys, 4 year

maintenance contract costs $20,000 at beginning of each year.

– Residual value at t = 4: $100,000.

Time Line: After-Tax Cost of Owning(In Thousands)

0 1 2 3 4

AT loan pmt -60 -60 -60 -1,060Dep shld 132 180 60 28Maint -20 -20 -20 -20 Tax sav 8 8 8 8RV 100 Tax -40

NCF 60 108 -12 -984

Note the depreciation shield in each year equals the depreciation expense times the lessee’s tax rate. For Year 1, the depreciation shield is

$330,000(0.40) = $132,000. The present value of the cost of owning cash

flows, when discounted at 6%, is -$639,267.

Leasing is similar to debt financing.– The cash flows have relatively low risk; most are

fixed by contract.– Therefore, the firm’s 10% cost of debt is a good

candidate.

The tax shield of interest payments must be recognized, so the discount rate is

10%(1 - T) = 10%(1 - 0.4) = 6.0%.

Why use 6% as the discount rate?

Time Line: After-Tax Cost of Leasing(In Thousands)

0 1 2 3 4

Lease pmt -280 -280 -280 -280

Tax sav 112 112 112 112

NCF -168 -168 -168 -168

PV cost of leasing @ 6% = -$617,066.

NAL = PV cost of leasing - PV cost of owning

= - $617,066 - (-$639,267)= $22,201.

Should the firm lease or buy the equipment? Why? Lease the equipment. Because the advantage of leasing over owning is $22,201

What is the net advantage to leasing (NAL)?

Soal Latihan

PT. Asoy dihadapkan dua pilihan, membeli komputer atau leasing. Diketahui harga komputer 200.000. Perusahaan dapat meminjam uang untuk membeli dengan bunga 10% per tahun. Masa pakai komputer adalah 4 tahun tanpa nilai sisa. Pajak sebesar 40% dan depresiasi menggunakan metode straight line: 50.000 per tahun. Apabila perusahaan leasing, dikenakan sebesar 60.000 per tahun. Biaya hutang/ discount rate sebesar 8%. Apakah PT. Asoy harus membeli atau leasing komputer tsb? Hitung NAL!

Example

Input Data (all dollar figures in thousands) New Equipment cost $200 New Equipment life 4 Equip. Salvage Value 0 Tax Rate 40% Loan interest rate 10% Annual rental charge $60 Depreciation $40 After-tax cost of debt 8%

AnswerYear = 0 1 2 3 4

Cost of OwningEquipment cost ($200)Loan amount $200Interest expense ($20) ($20) ($20) ($20)Tax savings from interest 8 8 8 8Principal repayment ($200)Tax savings from depr. $20 $20 $20 $20Net cash flow $0 $8 $8 $8 ($192)PV ownership cost @ 8% ($120,51)

Cost of LeasingLease payment ($60) ($60) ($60) ($60)Tax savings from lease $24 $24 $24 $24Net cash flow $0 ($36) ($36) ($36) ($36)PV of leasing @ 8% ($119,24)

Cost ComparisonPV ownership cost @ 8% ($120,51)PV of leasing @ 8% ($119,24)Net Advantage to Leasing $1,27

Answer

PT Asoy aja lebih baik leasing karena NAL nya positif sebesar $1.27