【正文】 al benefit of longterm leasing is tax reduction. ? Leasing allows the transfer 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. McGrawHill/Irwin Copyright 169。 2023 by The McGrawHill Companies, Inc. All rights reserved. 2110 Taxes, the IRS, and Leases ? The lessee can deduct lease payments if the lease is qualified by the IRS. 1. The term must be less than 30 years. 2. There can be no bargain purchase option. 3. The lease should not have a schedule of payments that is very high at the start of the lease and low thereafter. 4. The lease payments must provide the lessor with a fair market rate of return. 5. The lease should not limit the lessee’s right to issue debt or pay dividends. 6. Renewal options must be reasonable and reflect fair market value of the asset. McGrawHill/Irwin Copyright 169。 2023 by The McGrawHill Companies, Inc. All rights reserved. 2111 The Cash Flows of Leasing Consider 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, they will depreciate it straightline to zero. They can lease it for 5 years from Tiger Leasing with an annual lease payment of $6,250. McGrawHill/Irwin Copyright 169。 2023 by The McGrawHill Companies, Inc. All rights reserved. 2112 The Cash Flows of Leasing ? Cash Flows: Buy Year 0 Years 15 Cost of truck –$25,000 Aftertax savings 4,500 () = $2,970 Depreciation Tax Shield 5,000 (.34) = $1,700 –$25,000 $4,670 ? Cash Flows: Lease Year 0 Years 15 Lease Payments –6,250 () = –$4,125 Aftertax savings 4,500 () = $2,970 –$1,155 ? Cash Flows: Leasing Instead of Buying Year 0 Years 15 $25,000 –$1,155 – $4,670 = –$5,825 McGrawHill/Irwin Copyright 169。 2023 by The McGrawHill Companies, Inc. All rights reserved. 2113 The Cash Flows of Leasing ? Cash Flows: Leasing Instead of Buying Year 0 Years 15 $25,000 –$1,155 – $4,670 = –$5,825 ? Cash Flows: Buying Instead of Leasing Year 0 Years 15 –$25,000 $4,670 –$1,155 = $5,825 ? However we wish to conceptualize this, we need to have an interest rate at which to discount the future cash flows. ? That rate is the aftertax rate on the firm’s secured debt. McGrawHill/Irwin Copyright 169。 2023 by The McGrawHill Companies, Inc. All rights reserved. 2114 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 rate of interest. ? Optimal Debt Level and Riskless Cash Flows – In a world with corporate taxes, one determines the increase in the firm’s optimal debt level by discounting a future guaranteed aftertax inflow at the aftertax riskless interest rate. McGrawHill/Irwin Copyright 169。 2023 by The McGrawHill Companies, Inc. All rights reserved. 2115 NPV Analysis of the Decision ? A lease payment is like the debt service on a secured bond issued by the lessee. ? In the real world, many panies discount both the depreciation tax shields and the lease payments at the aftertax interest rate on secured debt issued by the lessee. McGrawHill/Irwin Copyright 169。 2023 by The McGrawHill Companies, Inc. All rights reserved. 2116 NPV Analysis of the Decision $)(825,5$000,25$ 51???? ??t tNPV $)(825,5$000,25$ 51???? ??t tNPVNPV Buying Instead of Leasing Year 0 Years 15 $25,000 $4,670 – $1,155 = $5,825 ? There is a simple method for evaluating leases: discount all cash flows at the aftertax interest rate on secured debt issued by the lessee. Suppose that rate is 5 percent. NPV Leasing Instead of Buying Year 0 Years 15 $25,000 –$1,155 – $