What are the differences between a finance lease and an operating lease? Why is the cost...

 

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What are the differences between a finance lease and an operating lease? Why is the cost of replacement tires being ignored in the lease v buy analysis? Tori's textbook states that when making a lease versus buy decision, the firm will find that inexpensive borrowing opportunities, high required lessor returns and a low risk of obsolescence increase the attractiveness of buying the asset.' Explain. Construct (i) a depreciation schedule for the truck assuming a 15-year effective life, and (ii) a loan amortization schedule assuming annual loan repayments. Use the case information to complete the lease versus buy analysis in the EXCEL spreadsheet Lease v Buy - Preliminary Analysis. The net advantage to leasing is the difference between the net present value of the lease option and the net present value of the 'borrow and buy' option. Assume a corporate tax rate of 30%. Be prepared to share your model in class. Should McKenna Transport lease or buy the new truck? Justify your answer. What are the differences between a finance lease and an operating lease? Why is the cost of replacement tires being ignored in the lease v buy analysis? Tori's textbook states that when making a lease versus buy decision, the firm will find that inexpensive borrowing opportunities, high required lessor returns and a low risk of obsolescence increase the attractiveness of buying the asset.' Explain. Construct (i) a depreciation schedule for the truck assuming a 15-year effective life, and (ii) a loan amortization schedule assuming annual loan repayments. Use the case information to complete the lease versus buy analysis in the EXCEL spreadsheet Lease v Buy - Preliminary Analysis. The net advantage to leasing is the difference between the net present value of the lease option and the net present value of the 'borrow and buy' option. Assume a corporate tax rate of 30%. Be prepared to share your model in class. Should McKenna Transport lease or buy the new truck? Justify your answer.

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1 Differences between Finance Lease and Operating Lease Ownership In a finance lease the lessee typically assumes ownership of the asset at the end of ... View the full answer