LEASE FINANCING AND BUSINESS VALUATION

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Case Questions
1. What is the difference between an operating lease and a financial lease?
2. What is a sale and leaseback?
3. How do per procedure payment terms differ from conventional terms?
4. What is the difference between a tax-oriented (guideline) lease and a non–tax oriented lease?
5. Why should the IRS care about lease provisions?
6. What is a tax-exempt lease?
7. Why is lease financing sometimes called off-balance sheet financing?
8. How are leases accounted for on a business’s balance sheet? On its income statement?
9. Explain how the cash flows are structured in conducting a dollar cost (NAL) analysis.
10. Briefly describe two approaches commonly used to value businesses.
11. What are some problems that occur in the valuation process?
12. Which approach do you believe to be best? Explain your answer.
13. What discount rate should be used when lessees perform lease analyses?
14. What is the economic interpretation of the net advantage to leasing?
15. What is the economic interpretation of a lease’s IRR?
16. What are some economic factors that motivate leasing—that is, what asymmetries might exist that make leasing beneficial to both lessors and lessees?
17. Would it ever make sense to lease an asset that has a negative NAL when evaluated by a conventional lease analysis? Explain your answer.

Additional Files:

1269682_1_Case-7.doc

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