ADM 3350 Lecture Notes - Lecture 8: Tax Shield, Net Present Value, Canada Revenue Agency
21 Nov 2017
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22. 5 a detour on discounting and debt capacity with corporate taxes. 22. 8 does leasing ever pay: the base case. A lease is a contractual agreement between a lessee and lessor. The agreement establishes that the lessee has the right to use an asset and in return must make periodic payments to the lessor. The lessor is either the asset"s (cid:373)a(cid:374)ufa(cid:272)turer or an independent leasing company. Firm u buys asset and uses asset; financed by debt and equity. Uses asset: does not use asset, does not own asset. Payments required under the terms of the lease are not enough to recover the full cost of the asset for the lessor: usually require the lessor to maintain and insure the asset. This option gives the lessee the right to cancel the lease contract before the expiration date. The lessee receives cash today from the sale. The lessee agrees to make periodic lease payments, thereby retaining the use of the asset.
