Exam 15: Leasing and Other Equipment Finance

Tow Ltd plans to expand its fleet of train engines.It is considering the following alternatives: • Purchase • Lease Further information is as follows: Calculate the NPV of a lease versus purchasing decision.Assume that the tax treatment associated with disposal is riskier than the lease cash flows.

A leveraged lease differs from an ordinary finance lease in that it involves at least ________ parties.

A loan secured by a mortgage over movable property is known as a:

The Australian Equipment Lessors Association reports that for the 2007-08 financial year motor vehicles accounted for:

An __________ lease separates the risks of ownership from the use of the asset,and provides advantages such as convenience and flexibility,insurance against obsolescence and lower transaction costs.

XYZ Ltd intends to lease to another company for a duration of five years equipment which costs $500 000 and can be depreciated straight-line over three years for tax purposes.Assume the cost of capital is 10% p.a. ,the residual value is 20 per cent of cost,the tax rate is 30 per cent and that annual lease payments are payable in advance.Calculate the minimum after-tax lease payments if it desires a rate of return at 10 per cent after tax.

XYZ Ltd intends to lease to another company for a duration of five years equipment which costs $500 000 and can be depreciated straight-line over three years for tax purposes.Assume the cost of capital is 10% p.a. ,the residual value is 20 per cent of cost,the tax rate is 30 per cent and that annual lease payments are payable in advance.Calculate the minimum before-tax lease payments that XYZ Ltd should quote if it desires a rate of return of 10 per cent after tax.

Myers,Dill and Bautista (1976)evaluated finance leases in the context of its effect on the lessee's ______________.

Tow Ltd plans to expand its fleet of train engines.It is considering the following alternatives: Purchase Lease Further information is as follows: Calculate the NPV of the project if Tow Ltd decides to purchase the train engine.

Which Accounting Standard states that the accounting treatment of a lease depends on whether it is classified as an operating lease or a finance lease?

Which lease is essentially a rental agreement?

Which lease can be best defined as a cancellable lease which is written for a period considerably less than the useful life of the leased asset?

Chattel mortgages are treated in the same way as other loans in that they are classed as a financial supply and as such no GST is payable on the provision of the loan or loan repayment.

An essential feature of a commercial hire-purchase agreement is that:

A finance lease is considered an alternative to other forms of debt finance.

According the estimate of the Australian Equipment Lessors Association,leasing and other equipment finance accounts for around what percentage of all capital expenditure on equipment in Australia?

Which of the following statements is not a reason identified by Smith and Wakeman (1985)to explain leasing policy?

Tow Ltd plans to expand its fleet of train engines.It is considering the following alternatives: • Purchase • Lease Further information is as follows: What is the maximum operating licence fee that Tow Ltd would be willing to pay?

Shine Ltd is considering purchasing or leasing new equipment.If it purchases the equipment it will cost $500 000 and if it leases the equipment it will be required to pay six rentals of $115 000 each.The equipment can be depreciated over three years on a straight-line basis for tax purposes.The residual value is expected to be zero and the tax rate is 30 per cent.Assume that rental payments are paid at the beginning of each period.Assume the cost of capital after tax is 10 per cent.Calculate the NPV (approx. )of the lease relative to an equivalent loan.

Companies may seek to take advantage of differences between tax regulations of different countries through a ___________________ lease.