Chap025.pdf

Chapter 25 - Leasing

Chapter 25 Leasing Multiple Choice Questions

1. In a lease arrangement, the user of the asset is: A. Lien B. Lessee C. Lessor D. Lease

2. In a lease arrangement, the owner of the asset is the: A. Lessor B. Lessee C. Lien D. None of the above

3. Lease payments can be thought of as: A. an ordinary annuity B. an annuity due C. a series of unequal payments D. none of the above

4. Leveraged leases are a form of: A. Operating lease B. Financial lease C. Lease which considerably reduces lessee's obligations D. All of the above

5. Which of the following is not a financial lease? A. A direct lease B. An operating lease C. A sale-and-leaseback D. None of the above

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Chapter 25 - Leasing

6. Which of the following statements is not true? I) The lessee does not have to buy the equipment II) The lessee is responsible for making the lease payments III) The lease payments are not tax-deductible IV) The lessee gives up the depreciation tax shield A. I only B. II only C. III only D. I, II, and IV only

7. Sale and lease back arrangements are prevalent in: A. Air-crafts B. Computers C. Real estate D. Standard industrial equipment

8. The firm X sold the office building and used the proceeds to improve its financial position. The firm then leased the building back in order to continue to use the facilities. This is an example of: A. an operating lease B. a sale and lease-back C. a leveraged lease D. a fully amortized lease

9. If the lessor borrows much of the purchase price of a leased asset, the lease is called: A. A leveraged lease B. A sale-and-leaseback C. A capital lease D. A non-recourse lease

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Chapter 25 - Leasing

10. The following are sensible reasons for leasing except: A. Short-term leases are convenient B. Standardization leads to low administrative and transaction costs C. Leasing preserves capital D. Lease cancellation options are valuable

11. The following are sensible reasons for leasing: I) maintenance is provided II) tax shields can be used III) leasing avoids capital expenditure controls IV) avoiding the alternative minimum tax A. I and II only B. I, II, and III only C. I, II, III and IV D. I, II and IV only

12. The following are sensible reasons for leasing: I) short-term leases are convenient II) standardization leads to low administrative and transaction costs III) lease cancellation options are valuable IV) tax shields can be used A. I and II only B. I, II and III only C. I, II, III and IV D. I, II, and IV only

13. The following are advantages to lessors over secured lenders if a firm is under bankruptcy except: A. the bankruptcy court decides that the leased asset is essential to the lessee's business and affirm the lease thus paving the way for continued lease payments. B. the lease is rejected and the lessor can recover the leased asset. C. a lessee in financial distress may be able to renegotiate the lease thus forcing the lessor to accept lower lease payments. D. none of the above are advantages to the lessor.

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Chapter 25 - Leasing

14. Which of the following is probably not a good reason for leasing instead of buying? A. Leasing may provide off-balance sheet financing B. Leasing may reduce administrative and transaction costs C. Tax shields can be used D. All of the above are good reasons

15. The following are dubious reasons for leasing: I) leasing avoids capital expenditure controls II) leasing preserves capital III) leasing can make the firm's balance sheet and income statement look better by increasing book income or decreasing book assets or both IV) avoiding the alternative minimum tax A. I and II only B. I, II and III only C. I, II, III and IV D. I, II and IV only

16. FASB defines capital lease as leases that meet the following: I) The lease agreement transfers ownership to the lessee before the lease expires. II) The lessee can purchase the asset for a bargain price when lease expires. III) The lease lasts for at least 75% of the asset's estimated economic life. IV) The present value of the lease payments is at least 90% of the asset's value. A. I or II B. I or II or III C. I or II or III or IV D. II or III or IV

17. If the after-tax present value of buying equipment and using it for 6 years is $100,000, calculate the break-even after-tax yearly lease payment (7 payments) using 7% discount rate. (Assume that the lease payments are made at the beginning of the year.) A. $14,286 B. $17,341 C. $18,555 D. None of the above

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Chapter 25 - Leasing

18. If the after-tax lease payments per year is $17,000, calculate the before tax lease payments if the tax rate is 35%: A. $48,571 B. $22,950 C. $26,154 D. none of the above

19. If the depreciation is $20,000 and the tax rate is 35%, calculate the depreciation taxshield: A. 20,000 B. 13,000 C. 7,000 D. None of the above

20. If annual lease payments for a firm are $26,000, calculate the tax-shield of lease payment, given that the tax rate is 35% A. $9,100 B. $16,900 C. $40,000 D. none of the given answers

21. If annual lease payments for a firm are $26,000, calculate the after-tax lease payments, given that the tax rate is 35% A. $9,100 B. $16,900 C. $40,000 D. none of the given answers

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Chapter 25 - Leasing

22. You have shopped for a new car and the best purchase price you can get is $15,000. You have been offered a lease with 36 monthly payments of $249 and a residual value of $7,500. The interest rate that the bank would charge you to borrow money is 9%(APR). What is the NPV of the lease arrangement? (Approximately) (Ignore taxes) A. $1,439 B. $1,380 C. $406 D. None of the above

23. Which of the following conditions in a lease agreement that would probably cause the Internal Revenue Service to treat the lease as an installment sale? I) Giving the lessee the right to acquire the assets for $1 when the lease expires II) Limiting the lessee's right to issue debt while the lease is in force III) Limiting the lessee's right to pay dividends while the lease is in force IV) Designating part of the lease payment as interest A. I, II, III, and IV B. I, II, and III only C. I only D. IV only

24. If the interest rate on debt is rD, what adjusted discount rate should the company use when valuing financial leases? The marginal tax rate is Tc. A. rD(1 - Tc) B. rDTc C. rD D. 1 - rDTc

25. If a firm can borrow at 9% , what discount rate should the firm use to discount lease cash flows? (The marginal tax rate for the firm is 35%) A. 3.15% B. 5.85% C. 9.00% D. none of the above

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Chapter 25 - Leasing

26. Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of $1,000 per year with the first payment occurring immediately. The computer would cost $8,100 to buy and would be depreciated using the straight-line method to zero salvage over 9 years. The firm can borrow at a rate of 8%. The corporate tax rate is 30%. What is the NPV of the lease? A. -$1039.78 B. $6,610.22 C. $686.00 D. $360.00

27. Your firm is considering leasing a magic box. The lease lasts for 3 years. The lease calls for 4 payments if $1,000 per year with the first payment occurring at lease inception. The magic box would cost $3,600 to buy and would be straight-line depreciated to zero salvage value over 3- years. The firm can borrow at 6%, and the corporate tax rate is 30%. What is the NPV of the lease? A. $30.50 B. -$30.50 C. -$65.75 D. None of the above

28. A firm is considering leasing. The firm can borrow at 9%, and the corporate tax rate is 30%. What is the discount rate for valuing the lease? A. 9% B. 30% C. 2.7% D. 6.3%

29. A computer costs $500,000 and is depreciated for tax purposes straight-line over years 1 through 5. Assume that it has zero salvage value at the end of 5 years. The user wishes to lease the computer by making 6 annual lease payments, the first of which is due immediately. If taxes are paid without delay and the rate of interest is 10%, what is the minimum acceptable lease payment for a lessor who pays tax at 35%? (Approximately) A. $71,905 B. $105,798 C. $123,455 D. Need more information to solve

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Chapter 25 - Leasing

30. Assume the initial financing provided by a lease is $500,000 and the present value of the cash outflow attributable to the lease is $525,000. Then the net value of the lease is: A. $25,000 B. -$25,000 C. $1,025,000 D. None of the above

31. Assume the initial financing provided by a lease is $100,000 and the present value of the cash outflow attributable to the lease is $90,000. Then the net value of the lease is: A. +$10,000 B. -$10,000 C. $190,000 D. None of the above

32. If the net present value of a project is -$10,000, and the net present value of leasing for the project is +$12,000, calculate the APV (Adjusted present value) of the project: A. -$2,000 B. $2,000 C. $12,000 D. -$10,000

33. The cost of a 10 year lease adds $200,000 per year in after tax cash flows, compared to using a loan to purchase the asset. Ceteris paribus, and given a usable life of 10 years with no salvage value, what is the advantage of a lease given a discount rate of 7%? A. $200,000 B. $1,400,000 C. $1,800,000 D. $2,000,000

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Chapter 25 - Leasing

34. The cost of a 7 year lease is $150,000 per year and matches the exact cost of a loan to finance the purchase of equipment. Ceteris paribus, and given a usable life of 7 years with no salvage value, what is the advantage of a lease given a discount rate of 7% and no taxes? A. $0 B. $800,000 C. $1,500,000 D. $2,000,000

True / False Questions

35. A short-term, cancelable lease is known as a financial lease; a long-term, non-cancelable lease is called an operating lease. True False

36. The user of the leased asset is called the lessee and the owner of the asset is called the lessor. True False

37. Under a leveraged lease, the lessee borrows money and is then used to make the lease payments. True False

38. In a sale and lease-back, the firm sells the asset it already owns and leases it back from the buyer. True False

39. One of the sensible reasons for leasing is that short-term leases are convenient. True False

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Chapter 25 - Leasing

40. A lessee in financial distress may be able to renegotiate the lease and force the lessor to accept lower lease payments. True False

41. A dubious reason for leasing is that leasing preserves capital. True False

42. The decision rule for lease or buy decision is "buy if the equivalent annual cost of ownership and operation is greater than the best rate you can get from an outsider (lessor)." True False

43. Financial leases are evaluated by discounting lease cash flows at the company's WACC. True False

44. Leasing is more likely to be advantageous when the lessor's tax rate is substantially higher than the lessee's. True False

45. If lease expenses are not tax deductible, it is likely that leases will still have significant benefits to a firm. True False

46. The tax code can be modified to alter the attractiveness of leases.

True False

Short Answer Questions

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Chapter 25 - Leasing

47. Discuss the differences between an operating lease and a financial lease.

48. Briefly explain sale and lease back arrangement.

49. Briefly explain how lessor's position would be affected if lessee firm is under financial distress.

50. What is the discount rate used for lease or buy analysis?

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Chapter 25 - Leasing

51. What happens to the NPV of leasing if the tax rate increases?

52. What happens to the NPV of leasing if the lease payments increase?

53. Discuss the critical conditions under which leasing may be advantageous.

54. Briefly explain the term "cross-border leases."

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Chapter 25 - Leasing

55. What advantage does a sale lease back to a SPE have?

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Chapter 25 - Leasing

Chapter 25 Leasing Answer Key

Multiple Choice Questions

1. In a lease arrangement, the user of the asset is: A. Lien B. Lessee C. Lessor D. Lease

Type: Easy

2. In a lease arrangement, the owner of the asset is the: A. Lessor B. Lessee C. Lien D. None of the above

Type: Easy

3. Lease payments can be thought of as: A. an ordinary annuity B. an annuity due C. a series of unequal payments D. none of the above

Type: Easy

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Chapter 25 - Leasing

4. Leveraged leases are a form of: A. Operating lease B. Financial lease C. Lease which considerably reduces lessee's obligations D. All of the above

Type: Easy

5. Which of the following is not a financial lease? A. A direct lease B. An operating lease C. A sale-and-leaseback D. None of the above

Type: Easy

6. Which of the following statements is not true? I) The lessee does not have to buy the equipment II) The lessee is responsible for making the lease payments III) The lease payments are not tax-deductible IV) The lessee gives up the depreciation tax shield A. I only B. II only C. III only D. I, II, and IV only

Type: Easy

7. Sale and lease back arrangements are prevalent in: A. Air-crafts B. Computers C. Real estate D. Standard industrial equipment

Type: Easy

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Chapter 25 - Leasing

8. The firm X sold the office building and used the proceeds to improve its financial position. The firm then leased the building back in order to continue to use the facilities. This is an example of: A. an operating lease B. a sale and lease-back C. a leveraged lease D. a fully amortized lease

Type: Medium

9. If the lessor borrows much of the purchase price of a leased asset, the lease is called: A. A leveraged lease B. A sale-and-leaseback C. A capital lease D. A non-recourse lease

Type: Medium

10. The following are sensible reasons for leasing except: A. Short-term leases are convenient B. Standardization leads to low administrative and transaction costs C. Leasing preserves capital D. Lease cancellation options are valuable

Type: Medium

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Chapter 25 - Leasing

11. The following are sensible reasons for leasing: I) maintenance is provided II) tax shields can be used III) leasing avoids capital expenditure controls IV) avoiding the alternative minimum tax A. I and II only B. I, II, and III only C. I, II, III and IV D. I, II and IV only

Type: Medium

12. The following are sensible reasons for leasing: I) short-term leases are convenient II) standardization leads to low administrative and transaction costs III) lease cancellation options are valuable IV) tax shields can be used A. I and II only B. I, II and III only C. I, II, III and IV D. I, II, and IV only

Type: Medium

13. The following are advantages to lessors over secured lenders if a firm is under bankruptcy except: A. the bankruptcy court decides that the leased asset is essential to the lessee's business and affirm the lease thus paving the way for continued lease payments. B. the lease is rejected and the lessor can recover the leased asset. C. a lessee in financial distress may be able to renegotiate the lease thus forcing the lessor to accept lower lease payments. D. none of the above are advantages to the lessor.

Type: Difficult

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Chapter 25 - Leasing

14. Which of the following is probably not a good reason for leasing instead of buying? A. Leasing may provide off-balance sheet financing B. Leasing may reduce administrative and transaction costs C. Tax shields can be used D. All of the above are good reasons

Type: Medium

15. The following are dubious reasons for leasing: I) leasing avoids capital expenditure controls II) leasing preserves capital III) leasing can make the firm's balance sheet and income statement look better by increasing book income or decreasing book assets or both IV) avoiding the alternative minimum tax A. I and II only B. I, II and III only C. I, II, III and IV D. I, II and IV only

Type: Medium

16. FASB defines capital lease as leases that meet the following: I) The lease agreement transfers ownership to the lessee before the lease expires. II) The lessee can purchase the asset for a bargain price when lease expires. III) The lease lasts for at least 75% of the asset's estimated economic life. IV) The present value of the lease payments is at least 90% of the asset's value. A. I or II B. I or II or III C. I or II or III or IV D. II or III or IV

Type: Difficult

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Chapter 25 - Leasing

17. If the after-tax present value of buying equipment and using it for 6 years is $100,000, calculate the break-even after-tax yearly lease payment (7 payments) using 7% discount rate. (Assume that the lease payments are made at the beginning of the year.) A. $14,286 B. $17,341 C. $18,555 D. None of the above PV = -100,000; N = 7, I = 7%; Use BGN mode, Compute PMT on a financial calculator PMT = 17,341

Type: Medium

18. If the after-tax lease payments per year is $17,000, calculate the before tax lease payments if the tax rate is 35%: A. $48,571 B. $22,950 C. $26,154 D. none of the above Before-tax payment = (After-tax payment)/(1 - T) = 17,000/(1 - 0.35) = $26,154

Type: Easy

19. If the depreciation is $20,000 and the tax rate is 35%, calculate the depreciation taxshield: A. 20,000 B. 13,000 C. 7,000 D. None of the above Depreciation tax-shield = (Dep) * (TC) = 20,000 * 0.35 = $7,000

Type: Easy

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Chapter 25 - Leasing

20. If annual lease payments for a firm are $26,000, calculate the tax-shield of lease payment, given that the tax rate is 35% A. $9,100 B. $16,900 C. $40,000 D. none of the given answers Tax shield of lease payment = (26,000)(0.35) = 9,100

Type: Medium

21. If annual lease payments for a firm are $26,000, calculate the after-tax lease payments, given that the tax rate is 35% A. $9,100 B. $16,900 C. $40,000 D. none of the given answers After - Tax payment = (26,000)(1 - 35) = 16,900

Type: Medium

22. You have shopped for a new car and the best purchase price you can get is $15,000. You have been offered a lease with 36 monthly payments of $249 and a residual value of $7,500. The interest rate that the bank would charge you to borrow money is 9%(APR). What is the NPV of the lease arrangement? (Approximately) (Ignore taxes) A. $1,439 B. $1,380 C. $406 D. None of the above NPV = 15,000 - PV(249, 36 monthly payments at 0.75%) - PV (7500 at 0.75%, 36 months) N = 36, I = 0.75, PMT = 249, FV = 7,500; Compute PV = $13,561; NPV = 15,000 - 13561 = +1439

Type: Difficult

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Chapter 25 - Leasing

23. Which of the following conditions in a lease agreement that would probably cause the Internal Revenue Service to treat the lease as an installment sale? I) Giving the lessee the right to acquire the assets for $1 when the lease expires II) Limiting the lessee's right to issue debt while the lease is in force III) Limiting the lessee's right to pay dividends while the lease is in force IV) Designating part of the lease payment as interest A. I, II, III, and IV B. I, II, and III only C. I only D. IV only

Type: Medium

24. If the interest rate on debt is rD, what adjusted discount rate should the company use when valuing financial leases? The marginal tax rate is Tc. A. rD(1 - Tc) B. rDTc C. rD D. 1 - rDTc

Type: Difficult

25. If a firm can borrow at 9% , what discount rate should the firm use to discount lease cash flows? (The marginal tax rate for the firm is 35%) A. 3.15% B. 5.85% C. 9.00% D. none of the above

Type: Easy

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Chapter 25 - Leasing

26. Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of $1,000 per year with the first payment occurring immediately. The computer would cost $8,100 to buy and would be depreciated using the straight-line method to zero salvage over 9 years. The firm can borrow at a rate of 8%. The corporate tax rate is 30%. What is the NPV of the lease? A. -$1039.78 B. $6,610.22 C. $686.00 D. $360.00 NPV = [8100 - 1000(1 - 0.30)] - [1000(1 - 0.3) + (0.3)(900)](6.92169) = 7400 (970)(6.92169) = + 686 (Discount rate = 5.6%)

Type: Difficult

27. Your firm is considering leasing a magic box. The lease lasts for 3 years. The lease calls for 4 payments if $1,000 per year with the first payment occurring at lease inception. The magic box would cost $3,600 to buy and would be straight-line depreciated to zero salvage value over 3- years. The firm can borrow at 6%, and the corporate tax rate is 30%. What is the NPV of the lease? A. $30.50 B. -$30.50 C. -$65.75 D. None of the above [3600 - 1000(1 - 0.3)] - [1000(1 - 0.3) + 1200(0.3)](2.7646) = 2900 - 2930.50 = -30.50 Discount rate = 4.2%

Type: Difficult

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Chapter 25 - Leasing

28. A firm is considering leasing. The firm can borrow at 9%, and the corporate tax rate is 30%. What is the discount rate for valuing the lease? A. 9% B. 30% C. 2.7% D. 6.3% Discount rate = 9(1 - 0.3%) = 6.3%

Type: Medium

29. A computer costs $500,000 and is depreciated for tax purposes straight-line over years 1 through 5. Assume that it has zero salvage value at the end of 5 years. The user wishes to lease the computer by making 6 annual lease payments, the first of which is due immediately. If taxes are paid without delay and the rate of interest is 10%, what is the minimum acceptable lease payment for a lessor who pays tax at 35%? (Approximately) A. $71,905 B. $105,798 C. $123,455 D. Need more information to solve 0 = + 500,000 - [0.65(L)] - [0.65L + (100,000)(0.35)][4.1557]; (3.3512)L = 354,550; L = 354,550/3.3512 = 105,798

Type: Difficult

30. Assume the initial financing provided by a lease is $500,000 and the present value of the cash outflow attributable to the lease is $525,000. Then the net value of the lease is: A. $25,000 B. -$25,000 C. $1,025,000 D. None of the above 500,000 - 525,000 = -25,000

Type: Medium

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Chapter 25 - Leasing

31. Assume the initial financing provided by a lease is $100,000 and the present value of the cash outflow attributable to the lease is $90,000. Then the net value of the lease is: A. +$10,000 B. -$10,000 C. $190,000 D. None of the above 100,000 - 90,000 = +10,000

Type: Medium

32. If the net present value of a project is -$10,000, and the net present value of leasing for the project is +$12,000, calculate the APV (Adjusted present value) of the project: A. -$2,000 B. $2,000 C. $12,000 D. -$10,000 APV = -10,000 + 12,000 = +2,000

Type: Medium

33. The cost of a 10 year lease adds $200,000 per year in after tax cash flows, compared to using a loan to purchase the asset. Ceteris paribus, and given a usable life of 10 years with no salvage value, what is the advantage of a lease given a discount rate of 7%? A. $200,000 B. $1,400,000 C. $1,800,000 D. $2,000,000 PV of 200,000 annuity over 10 years.

Type: Medium

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Chapter 25 - Leasing

34. The cost of a 7 year lease is $150,000 per year and matches the exact cost of a loan to finance the purchase of equipment. Ceteris paribus, and given a usable life of 7 years with no salvage value, what is the advantage of a lease given a discount rate of 7% and no taxes? A. $0 B. $800,000 C. $1,500,000 D. $2,000,000 Without taxes, there is no advantage to a lease.

Type: Medium

True / False Questions

35. A short-term, cancelable lease is known as a financial lease; a long-term, non-cancelable lease is called an operating lease. FALSE

Type: Medium

36. The user of the leased asset is called the lessee and the owner of the asset is called the lessor. TRUE

Type: Easy

37. Under a leveraged lease, the lessee borrows money and is then used to make the lease payments. FALSE

Type: Medium

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Chapter 25 - Leasing

38. In a sale and lease-back, the firm sells the asset it already owns and leases it back from the buyer. TRUE

Type: Medium

39. One of the sensible reasons for leasing is that short-term leases are convenient. TRUE

Type: Medium

40. A lessee in financial distress may be able to renegotiate the lease and force the lessor to accept lower lease payments. TRUE

Type: Medium

41. A dubious reason for leasing is that leasing preserves capital. TRUE

Type: Medium

42. The decision rule for lease or buy decision is "buy if the equivalent annual cost of ownership and operation is greater than the best rate you can get from an outsider (lessor)." FALSE

Type: Difficult

43. Financial leases are evaluated by discounting lease cash flows at the company's WACC. FALSE

Type: Medium

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Chapter 25 - Leasing

44. Leasing is more likely to be advantageous when the lessor's tax rate is substantially higher than the lessee's. TRUE

Type: Medium

45. If lease expenses are not tax deductible, it is likely that leases will still have significant benefits to a firm. FALSE

Type: Medium

46. The tax code can be modified to alter the attractiveness of leases.

TRUE

Type: Medium

Short Answer Questions

47. Discuss the differences between an operating lease and a financial lease. Generally, operating leases are short-term leases. Operating leases are cancelable during the contract period. Generally, financial leases are long-term leases covering the economic life of the asset and non-cancelable. Financial leases are a source of financing.

Type: Medium

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Chapter 25 - Leasing

48. Briefly explain sale and lease back arrangement. A firm in need of cash may sell the office building it owns to a leasing company and simultaneously sign a long-term lease agreement for the use of the office building. This is called sale and lease-back arrangement. These transactions are common in real estate. The legal ownership of the office building is transferred to the leasing company, but the right to use it stays with the firm.

Type: Medium

49. Briefly explain how lessor's position would be affected if lessee firm is under financial distress. If a lessee defaults on a lease payment and if the bankruptcy court decides that the asset is "essential" to the lessee's business operations then the court "affirms" the lease. Under these circumstances the bankrupt firm will continue to use the asset and make the lease payments. If the lease is not affirmed then the lessor can recover the leased asset. There is another possibility for the lessors. That is the lessee under financial distress may be able to renegotiate the lease, thus compelling the lessor to accept lower lease payments.

Type: Medium

50. What is the discount rate used for lease or buy analysis? The discount rate used for discounting lease cash flows is the after-tax cost of debt rd(1 - TC) as the alternative to leasing is borrowing.

Type: Medium

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Chapter 25 - Leasing

51. What happens to the NPV of leasing if the tax rate increases? At higher tax rates, the NPV of the lease will increase as the discount rate is lower. Both lessee and lessor can win if their tax rates are different. That is when the lessor's tax rate is substantially higher than the lessee's.

Type: Difficult

52. What happens to the NPV of leasing if the lease payments increase? The NPV of leasing will decrease if the lease payments increase. This will increase the value of the lease to lessor.

Type: Medium

53. Discuss the critical conditions under which leasing may be advantageous. Leasing is advantageous when the interest rate rd is high. The depreciation tax shield is received early in the lease period. The lessor's tax rate is substantially higher than the lessee's. The lease period is long and the lease payments are loaded toward the end of the period.

Type: Medium

54. Briefly explain the term "cross-border leases." Generally, lessors are searching for lease arrangements that may increase the gains from leasing. Some of the more creative leasing involves cross-border leasing arrangements. Here lessor and lessee would be firms from different countries. These arrangements take advantage of the fact that different countries define ownership differently. This can give rise to situations where both lessor and lessee can gain from tax advantages in their countries respectively.

Type: Medium

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Chapter 25 - Leasing

55. What advantage does a sale lease back to a SPE have? The leasing company gets no cash inflows until the debt is paid off, but does get all depreciation and interest deductions, which generate tax losses that can be used to shield other income.

Type: Medium

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