【正文】 ? Lessee enjoys a cancellation option. 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. 2118 Debt Displacement and Lease Valuation ? The debt displaced by leasing results in fone interest tax shields on the debt that ClumZee movers didn’t go into when they leased instead of bought the truck. ? Suppose ClumZee agrees to a lease payment of $6,250 before tax. This payment would support a loan of $25, (see the next slide) ? In exchange for this, they get the use of a truck worth $25,000. ? Clearly the NPV is a negative $, which agrees with our earlier calculations. McGrawHill/Irwin Copyright 169。 2023 by The McGrawHill Companies, Inc. All rights reserved. 2126 Summary and Conclusions ? There are three ways to value a lease. 1. Use the realworld convention of discounting the incremental aftertax cash flows at the lessors aftertax rate on secured debt. 2. Calculate the increase in debt capacity by discounting the difference between the cash flows of the purchase and the cash flows of the lease by the aftertax interest rate. The increase in debt capacity from a purchase is pared to the extra outflow at year 0 from a purchase. 3. Use APV (presented in the appendix to this chapter). ? They all yield the same answer. ? The easiest way is the least intuitive. McGrawHill/Irwin Copyright 169。 2023 by The McGrawHill Companies, Inc. All rights reserved. 2134 Appendix 21A: APV Approach to Leasing APV = AllEquity Value + Financing NPV ? The NPV of the financing is the fone interest tax shields on the debt that ClumZee movers didn’t go into when they leased instead of bought the truck. ? ClumZee agreed to a lease payment of $5,900. ? This payment would support a loan of $25, ????51 )(900,5$,25$capacit ydeb t IncreasedttMcGrawHill/Irwin Copyright 169。 2023 by The McGrawHill Companies, Inc. All rights reserved. 2130 Appendix 21A: APV Approach to Leasing 5432 )066 ($)066 ($)066 ($)066 ($)066 ($,1$ ??????$,1$$ ????AP VThe lost interest tax shield associated with this additional debt capacity of $25, has a present value of $1, 0 1 2 3 4 5O u t s t a n d i n g B a l a n c e o f t h e L o a n $ 2 5 ,5 4 3 .9 1 $ 2 0 , 9 2 1 . 1 1 $ 1 6 , 0 6 7 . 1 6 $ 1 0 , 9 7 0 . 5 2 $ 5 , 6 1 9 . 0 5 $ 0 . 0 0In t e re s t $ 1 , 7 0 2 . 9 3 $ 1 , 3 9 4 . 7 4 $ 1 , 0 7 1 . 1 4 $ 7 3 1 . 3 7 $ 3 7 4 . 6 0T a x D e d u c t i o n o n i n t e re s t $ 4 2 5 . 7 3 $ 3 4 8 . 6 9 $ 2 6 7 . 7 9 $ 1 8 2 . 8 4 $ 9 3 . 6 5A ft e r t a x I n t e re s t E x p e n s e $ 1 ,2 7 7 .2 0 $ 1 ,0 4 6 .0 6 $ 8 0 3 .3 6 $ 5 4 8 .5 3 $ 2 8 0 .9 5McGrawHill/Irwin Copyright 169。 2023 by The McGrawHill Companies, Inc. All rights reserved. 2122 A Tax Arbitrage ? Suppose ClumZee movers is actually in the 25% tax bracket and Tiger Leasing is in the 34% tax bracket. If Tiger reduces the lease payment to $6,200, can both firms have a positive NPV? ? Cash Flows: Tiger Leasing Year 0 Years 15 Cost of truck –$25,000 Depreciation Tax Shield 5,000 (.34) = $1,700 Lease Payments 6,200 (1 –.34) = $4,092 –$25,000 $5,792 NPV = ? Cash Flows ClumZee Movers: Leasing Instead of Buying Year 0 Years 15 Cost of truck we didn’t buy $25,000 Lost Depreciation Tax Shield 5,000 (.25) = –$1,250 AfterTax Lease Payments 6,200 (1 –.25) = –$4,650 $25,000 –$5,9